Tax Debate: No Small Potatoes?

September 2, 2014

For Zack Brown, Danger is his middle name. Really! Apparently his name is Zack Danger Brown.

So who is Zack Brown? He is an online pseudo-celebrity on a site called Kickstarter. In exchange for money provided by strangers, Brown will make a potato salad. That’s all there is to it!

What is really fascinating about this story is the debate that has been stirred up in the financial press as to whether the $50,000 or more (less expenses such as potatoes and Kickstarter’s fee) that Brown is expected to receive will be subject to income tax under the general theory of “income from whatever source derived.” The competing view is that most contributors are making tax-free gifts to Brown “out of detached and disinterested generosity” for personal reasons and without the expectation of getting something in return.

Kickstarter is a fundraising platform for creative projects. Creative projects are clearly subjective and could include, as the company suggests, “everything from films, games and music to art, design and technology.”

The idea is simple: Pitch your project online and solicit funding from the public – a concept sometimes called “crowdfunding.” Kickstarter keeps a percentage, and you use the rest for your project.

There are very few parameters on Kickstarter about what you can and cannot do:

• No projects that are illegal, heavily regulated or potentially dangerous for backers
• No political fundraising
• No charitable solicitations
• No porn, drugs or weapons
• No pitching ideas that are not your own

Zack Brown describes himself in his complete bio on Kickstarter as “I’m the guy who will be making the potato salad.” And 5,000 people have offered to back his quest.

Shark Tank this is not.

Most people have chipped in $1 in exchange for Brown’s agreeing to say their names out loud while making potato salad. For $3, Brown offers a bite of the potato salad, a photo of himself making the potato salad and a thank-you note posted on his website – and he will also say your name out loud while making the potato salad.

For $10, you can hang out in the kitchen while Brown makes the potato salad. The only problem is that you do not know the time or the exact location in advance. And presumably you must make your own travel arrangements.

For $20, you will earn such wonders as a potato-salad-themed haiku, your name carved into a potato that will be used in the potato salad, a signed jar of mayonnaise and a potato salad recipe. Plus, you get to hang out in the kitchen with Brown while he makes the potato salad, etc., etc.

“My idea of heaven is a great big baked potato and someone to share it with.” – Oprah Winfrey