This is how country music star Conway Twitty once made the IRS sing the blues.
The Courts ruled in the case of Harold L. Jenkins (a/k/a Conway Twitty) v. Commissioner in country music style lyrics.
Twitty had had more No 1 hits than anyone in country music. His band was called the “Twitty Birds”; he had a theme park known as “Twitty City”; he jealously guarded the Twitty name and that’s what got him in trouble with the IRS.
He convinced 75 of his friends in the country music business to invest in his Twitty Burger restaurant chain.
When the business failed, Twitty reimbursed his friends for their losses even though he wasn’t legally obliged to do so.
He paid more than $96,000 which he routinely deducted as a business expense.
According to the IRS, his reimbursement of the investors was “very nice,” but nondeductible because he failed to link his payments of the corporation’s debts to his business as a performer.
The court stuck with Twitty and even quoted the singer’s testimony to the effect that, once you’ve lost the trust of your fans you’ve lost about everything.
(Feel free to add wife, truck dog etc here in true country music fashion)
Some of the investors were themselves country/western stars, like Merle Haggard and Sonny James. Several had threatened to sue. As his lawyer pointed out:
“Imagine trying to keep a band together where somebody [meaning Twitty] has stiffed the drummer’s mother.”
The Tax Court upheld the claimed business deduction and closed with a long rhyming poem summarizing the case and the decision not to appeal.
Tax Court’s “Ode to Conway Twitty”:
Twitty Burger went belly up
But Conway remained true
He repaid his investors, one and all
It was the moral thing to do.
‘His fans would not have liked it
It could have hurt his fame
Had any investors sued him
Like Merle Haggard or Sonny James.
‘When it was time to file taxes
Conway thought what he would do
Was deduct those payments as a business expense
Under section one-sixty-two.
‘In order to allow these deductions
Goes the argument of the Commissioner
The payments must be ordinary and necessary
To a business of the petitioner.
‘Had Conway not repaid the investors
His career would have been under cloud,
Under the unique facts of this case
Held: The deductions are allowed.
The judge said later that he doubted Twitty would turn the poem into a number 1 record, but he just couldn’t pass up the chance.
Perhaps the most surprising part of this case is that The IRS responded in the same spirit in an “Ode to Howard Twitty: A Reprise”.
IRS’s: “Ode to Conway Twitty: A Reprise”:
Harold Jenkins and Conway Twitty
They are both the same
But one was born
The other achieved fame.
The man is talented
And has many a friend
They opened a restaurant
His name he did lend.
They are two different things
Making burgers and song
The business went sour
It didn’t take long.
He repaid his friends
Why did he act
Was it business or friendship
Which is fact?
Business the court held
It’s deductible they feel
We disagree with the answer
But let’s not appeal.