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Malcolm Forbes Not Saying If He Will Write Off Party on Taxes

August 23, 1989

NEW YORK (AP) _ Malcolm Forbes is being vague about whether he plans to seek a tax write- off for his Moroccan ″party of the century,″ but opponents of a tax break are indignant at the idea of it.

″If this party were to be tax-deductible it would be a perfect example of how the tax system is unfair to the average citizen and benefits the rich,″ said Michael Waldman, director of Public Citizen’s Congress Watch, a Ralph Nader organization.

The magazine publisher’s 70th birthday party in Tangier on the north coast of Africa last weekend featured 600 belly dancers, 200 Berber horsemen, pigeon pie served under elaborate tents and a guest list that included Liz Taylor, Henry Kissinger, Walter Cronkite, Lee Iacocca, Rupert Murdoch, Barbara Walters, Beverly Sills and Donald Trump.

Guests were flown across the Atlantic on three jets, including a chartered supersonic Concorde. The party’s expense has been estimated at $2 million to $3 million.

Rep. Fortney ″Pete″ Stark, D-Calif., released a letter to Internal Revenue Service Commissioner Fred T. Goldberg on Tuesday saying he hopes the party is not deductible.

″The public’s support of the tax system is destroyed by reports of tax- deductible birthday bashes by belly-dancing billionaires,″ he wrote.

Forbes magazine officials failed to return repeated phone calls Tuesday seeking comment. The Washington Post on Monday quoted Forbes as saying that ″some of it is a business expense.″

″When you invite 300 CEOs that you do business with, you want to make a good impression,″ Malcolm Forbes Jr., who is the publisher’s eldest son and the magazine’s president, told The New York Times in an article Monday. He said any deduction would be worked out by company accountants. The IRS declined to comment on the tax-deductibility of the party but a spokesman pointed to pertinent sections of the tax code.

Section 262 says that aside from a small exception involving telephones, ″no deduction shall be allowed for personal, living or family expenses.″

The IRS generally considers birthday parties to be personal expenses, said Sid Weinman, an attorney and senior editor of Federal Tax Coordinator, published in New York by Research Institute of America.

Section 274 says no deduction is allowed ″with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, unless the taxpayer establishes that the item was directly related to or ... associated with the active conduct of the taxpayer’s trade or business.″

The Forbes bash might be viewed as a more lavish version of the parties for advertisers that most magazines give - and write off - since the companies run by many of Forbes’ guests also place ads in his magazine.

Still, Weinman said, ″My guess is they’d have a hard time establishing that the shebang over there was directly associated with the magazine’s business.″

Even if Forbes managed to clear that hurdle, he still would face a hurdle in Section 274 that disallows spending in ″amounts which are lavish or extravagant under the circumstances.″

The billionaire balloonist hurt his own cause on that question when he told reporters, ″We probably all do things in our lives that are not essential. I don’t feel guilty about it. I feel grateful we can do it.″

″Why should Malcolm Forbes be able to deduct his birthday party in Morocco just because people he does business with were there, when I can’t deduct my birthday party at the local pizzeria when I go out with people I work with?″ asked Waldman, of Congress Watch.

″This would be the ultimate proof of Leona Helmsley’s dictum that the rich don’t pay taxes, only the little people do,″ Waldman said, referring to the self-proclaimed hotel queen who is on trial on federal tax-evasion charges.

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