Last October (in the "before the election" time that now seems long ago and far away), ataxingmatter considered the many questions raised by Sarah Palin's limited release of tax returns for 2006 and 2007. See Sarah Palin's Tax Returns Part II, Oct. 7, 2008. As noted in that post, her returns for 2007 showed income of about $128 thoughsand, but did not include either the per diem payments from the State of Alaska or any travel reimbursements for her husband or her children. The Palins took deductions for Todd Palin's fishing and snowmobile racing, both of which were claimed as businesses rather than hobbies. (Losses are not deductible in excess of income for hobbies, under section 83).
The returns got lots of attention, as did those of other prominent candidates for election. There are lots of links through which you can trace the issues on the posting. I concluded that there were key tax issues that could not be answered fully solely by considering the information as released: Sarah Palin's per diems for days spent in Wasila; Todd Palin's cash reimbursements for travel (some with the governor and some on his own); the Palin children's cash reimbursements for travel, such as to Todd Palin's Iron Dog race; and Todd Palin's snowmobile racing activity losses. The issue that seemed the most likely to cause Sarah Palin problems was the per diem. After examining the State's per diem policy and reviewing federal "travel while away from home" rules, I concluded that the per diem amounts would be excluded only if Juneau was her tax home AND the days in Wasila were required for her to conduct state business necessary to be done in Anchorage.
It appears that the many tax bloggers who wrote about this issue were on target. The State of Alaska has now determined that its prior treatment of the Palin per diems was in error. See Demer, Palin owes tax on per diem, state says, Anchorage Daily News, Feb. 17, 2009 (hat tip to Bethany Ansorge); Alaska: Palin owes per Diem Tax, New York Times (AP), Feb. 19, 2009. Though not many specifics are provided, we do know that the Governor continued to charge the state for meals and incidentals when she spent time in Wasila as late as December 2008.
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