Santa Claus and His International Criminal Enterprise

Santa Claus: saint; bringer of cheer; spreader of joy; selfless; philanthropist. Not so.

Illegal surveillance and violations of privacy, breaking and entering, money laundering, illegal importation and exportation of currency, slave labor, patent and trademark violations, animal abuse, Anti-Trust violations, and pervasive violations of U.S. airspace via his illegally obtained sleigh-stealth technology.

The jolly red mass of suede known as “Santa Claus” has built himself a sophisticated criminal enterprise over the proceeding centuries, which in addition to the above indiscretions, includes evading potentially billions of dollars of federal taxes and tariff dues.

Santa Claus has never filed a tax return in any of the 190 countries in which he operates. However, persons that gift property over a certain value per year are required to file tax Form 709 with the Internal Revenue Service, which could result in tax due.

Internal Revenue Code section 2512 provides that a “gift” occurs if property is transferred for less than adequate and full consideration in money or money's worth. The amount of such gift equals the amount by which the value of property transferred exceeds the value of the consideration received. If all gifts are of a present interest and Santa receives no consideration, he has effectively made billions of potential taxable gifts over hundreds of years.

However, Santa may have one saving grace: IRC section 2503(b) holds that no taxable gift occurs if the value of the property transferred is less than $14,000 (for 2016).  It is safe to conclude the majority of Santa’s gifts are worth less than $14,000 per person (according to my childhood), and therefore he would generally have no federal filing requirement. But how often have we seen a man or woman walk outside on Christmas morning to find in their driveway a new car draped in red ribbon? Yes it’s rare, but it happens. In addition, the 2503 annual gift exclusion was historically much lower. There was no exclusion before 1923, and it never went above $5,000 per year between 1933 and 1981. Moreover, some countries have no gift tax exclusion. The bottom line – Santa should have filed millions of gift tax returns and remitted billions during the 20th century alone.

Even more alarming, Santa could impose upon the transferee (you) an obligation to file returns and pay taxes.

U.S. persons who receive gifts from foreign persons may be required to file IRS Form 3570 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) if the value of the property received exceeds certain thresholds. Failure to file the Form can result in brutal penalties. The reporting requirement is enhanced when a foreign partnership or corporation provides the gift. Santa is most likely considered a resident of the North Pole, for federal tax purposes, and therefore, a foreign person.  In addition, Santa has probably entered into a common law partnership with Ms. Claus, in which case, the transferee’s reporting requirement is heightened.  US persons receiving material gifts should obtain a professional appraisal of the gift and consult their tax advisor in determining their filing and payment obligations.

Have no doubt – these actions are intentional. To conceal his criminal behavior, ol’ Saint Nick has engaged in rampant identity theft, which is why Santa goes by different names in virtually every country. For example, in France he’s known as ‘Pere Noel’; the Germans call him as ‘Weihnachtsmann’; or ‘Dun Che Lao Ren in China’; and of course ‘Father Christmas’ in the U.K.  Moreover, Santa could face criminal charges in the U.S. for failure to file Foreign Bank Account Reports (FBAR) for the hundred of bank accounts located throughout the country over which he clearly has signing authority.

Perhaps they should call him ‘Father Tax Evasion,’ as Santa has never reported any income to any taxing authority, despite maintaining a luxurious compound in the North Pole, which serves as the heart of his criminal enterprise.


By Michael S. Cooper, Barnes Law

Michael Cooper is an associate attorney with Barnes Law, and is licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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