The Internal Revenue Service is asking for $2.7 million in taxes from race driver Juan Pablo Montoya, and he has filed a lawsuit in the U.S. Tax Court challenging the IRS’s assessment.
The tax dispute centers around the use of an offshore corporation in the Bahamas to which the Colombian race car driver assigned the rights to his “driver identity”—including his image, name, appearance and voice—before moving to the U.S. in 2007, according to Forbes.
In his lawsuit, Montoya reportedly has admitted that he had almost $800,000 in income than he and his wife originally reported for 2007 and 2008 on their joint return, but he disputed the IRS’s assertion that they had $9.5 million in taxable income for those two years instead of the $2.4 million they had reported.
The IRS also disallowed tax deductions that Montoya had claimed after his company JPM Motorsport sold his image to another of his companies, Monty Motorsport, for $15 million in 2006 and began amortizing the investment, claiming deductions of $1.4 million in 2007 and $1 million in 2008. And the agency rejected another deduction for $267,000 related to Montoya’s professional fees and a grantor trust that the Formula One driver set up when he moved to the U.S. to compete in Nascar races. Montoya also claimed tax breaks on the purchase of an $8.7 million Lear jet to attend Nascar races, which the IRS also denied. He plans to move on to IndyCar racing next year.
The case is reminiscent of an IRS tax evasion case against another race car driver, Helio Castroneves, also involving income from his image and likeness funneled through an offshore corporation. The two-time Indianapolis 500 champion was acquitted of criminal charges but still ended up paying millions of dollars in taxes to the IRS (see Racecar Driver Castroneves Acquitted of Tax Charges).
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access