IRS claims Newton has dues to pay

Suzanne Struglinski

Tuesday, Aug. 2, 2005 | 10:57 a.m.

WASHINGTON -- Wayne Newton might soon feel like singing the Las Vegas lounge standard, "They Can't Take That Away from Me."

The Internal Revenue Service says Mr. Las Vegas owes more than $1.4 million in taxes and $287,000 in penalties for the time period between 1997 and 2000, according to documents filed in federal Tax Court in Washington.

At the heart of some of the allegations made by the IRS is whether Newton understated his income tax or overvalued what he could deduct as business expenses. Newton erred in listing personal expenses as business expenses to the tune of $90,899 in 1997 and $143,881 in 1998, according to the IRS documents filed in April.

In one case, Newton claimed two homes -- one for him, one for his band -- in the Branson, Mo., area as business expenses, arguing that there was no first-class hotel or "any hotel that could provide the accommodations or security needed for a well-known personality such as Mr. Newton."

The IRS disagreed and said the homes were personal expenses and could not be deducted as business expenses for tax purposes.

Among the other IRS allegations is that Newton did not pay taxes on the $200,000 sale of an Arabian horse in 2000, according to IRS documents.

Newton also improperly claimed a $51,950 business loss on the sale of two antique cars in 2000, the IRS stated. The IRS argued that the cars were not adequately established to be business-related.

The IRS also alleges Newton wrongly tried to claim $58,199 worth of expenses as other business promotional expenses between 1997 and 2000. Newton has to provide better evidence that the expenses were proper business expenses, the IRS stated.

In a response filed July 8, Newton's lawyers assert that Newton did not knowingly do anything wrong, and they argue that the IRS may owe him money.

"If petitioners (Newton and his wife) understated tax on their income tax return for any year in issue they acted with reasonable cause and good faith," the lawyers said. "Petitioners are not sophisticated in tax matters."

The lawyers assert that the antique cars were for promotional use in performances and photographs, not for personal use.

"As part of cultivating and maintaining his entertainment business image of larger than life, glamour, sophistication and elegance, Mr. Newton used antique automobiles in that business," the document says.

The Newtons' lawyer A. Lavar Taylor today declined to comment other than to say that the IRS owes money to the Newtons, not vice versa.

The investments of the legendary entertainer known as the Midnight Idol once included 50 percent ownership of the Aladdin Hotel and Casino, and he has had run-ins with the IRS before.

Newton filed for Chapter 11 bankruptcy in August 1992, seeking to reorganize $20 million in debts. At the time, the IRS said Newton owed $341,000 in unpaid taxes.

Newton, who got his start in show business as a child performer with his brother on the Jackie Gleason Show in 1962, has become a Strip icon, best known for his signature song, "Danke Schoen." For a time, Newton was also known for some of his business investments, including investments in Indian casinos. Newton is still performing, scheduled to play an Indian Casino in Wisconsin next week, and at the Las Vegas Hilton from Aug. 16-27.

The Guinness Book of World Records listed Newton as the world's highest paid entertainer in 1983.

Sun Washington Bureau chief Benjamin Grove contributed to this story.