Mary Boone, the owner of a prestigious Manhattan art gallery, pleaded guilty Wednesday to federal tax charges.
Boone, 66, admitted to filing income tax returns falsely claiming approximately $1.6 million in personal expenses as tax deductible business expenses in 2011, when she held a 90 percent partnership interest in the gallery. According to prosecutors she directed her accountant to file fraudulent 2011 federal income tax returns for her gallery and for her individually. The gallery’s 2011 partnership return, Form 1065, reported a false business loss of approximately $52,521, even though the gallery actually made a profit of approximately $3.7 million in 2011.
“This is the worst day of my life,” Boone said in an email to Accounting Today. “I have learned from my mistake and I am working very hard to put it behind me.”
Boone’s gallery represents a number of celebrated artists, including Ai Weiwei, Joseph Beuys, Ross Bleckner and Francesco Clemente.
According to prosecutors, Boone used funds from the gallery to pay for over $1.6 million in personal expenses and then falsely claimed the personal expenses as business deductions. That year, she wrote approximately $800,000 in business checks to pay for remodeling her Manhattan apartment, plus approximately $120,000 more in business checks to pay for rent and other expenses for a second Manhattan apartment where she lived while remodeling was underway. To hide the personal nature of the expenses, she characterized around $1.6 million of them as tax deductible business expenses in handwritten check registers that she provided to her accountant. She characterized one $500,000 payment to a contractor for remodeling her apartment as a “commission.”
Boone had the gallery report a false business loss on its 2011 Form 1065 by artificially inflating its stated expenses and, to a lesser extent, its stated income. She gave check registers to her accountant characterizing transactions such as bank transfers as income or expenses. In 2011, she transferred approximately $9.5 million from one business bank account to another, and characterized the bank transfers as tax deductible business expenses, such as commissions to artists.
“Operating a Manhattan art gallery did not entitle Mary Boone to evade paying her taxes,” IRS-CI special agent-in-charge James D. Robnett said in a statement. “It is a felony offense that carries severe consequences. By falsely claiming millions of dollars of personal expenses as business expenses, Ms. Boone cheated all Americans, since law-abiding citizens are expected to pay their fair share.”
Boone’s 2011 individual income tax return was also false, according to prosecutors. Instead of reporting her partnership share of the gallery’s $3.7 million profit, her 2011 Form 1040 reported her personal income as limited to a payment of approximately $50,000 and interest income of approximately $60,000, and offset that reported income by her share of the gallery’s false reported business loss. She thereby evaded over $1.2 million in federal taxes and reported a false tax liability of only $335 on her 1040. Prosecutors said she engaged in similar tax fraud schemes for 2009 and 2010, causing losses to the IRS totaling more than $3 million, not counting penalties and interest.
