Olivia Schultz ran for a seat in the U.S. House of Representatives, raising 2 million for...

Olivia Schultz ran for a seat in the U.S. House of Representatives, raising 2 million for her campaign. Six months after losing the election, auditors discovered that Olivia had used $240,000 of the campaign funds to purchase a vacation home in Costa Rica. What are then income tax consequences of this use of campaign funds?

Expert Solution

Law on reporting campaign expenditures:

“Each report shall disclose: … Each person or organization, candidate or political committee who receives an expenditure, payment or other transfer from the reporting candidate … within the calendar year (that has) an aggregate value or amount in excess of ($200) together with the date and amount of such expenditure.”

A campaign contribution is not a gift to be used for personal expenditure.”

Use of campaign fund for personal purpose is prohibited . Campaign funds are shielded from

taxes, ethics and other laws because they are ostensibly to be used only for campaigning and records of them are ostensibly open to public

Conversion of campaign funds for personal use is considered as taxable income on income tax return and subject to income tax. So, Tax has to be paid on personal spending

In the given case Olivia Schultz ran for a seat in the U.S. House of Representatives, raising 2 million for her campaign & Auditor discovers that he had used $240,000 of the campaign funds to purchase a vacation home in Costa Rica i.e. for personal purpose

In this The auditor has to complied with state law, federal law every step of the way. He has to report above $ 240000 in his Audit Statement & Disallowed the personal expenditure Expenditure

Further , This $ 240000 Included in tax Statement of Olivia Schultz & he has to pay tax on that .

ekkarill92 answered 2 years ago

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