Financial Lessons From the Series The White Lotus
I suspect some of you have been intrigued by the HBO comedy/drama television series called The White Lotus. For those of you who haven’t watched it, it’s a series that follows the exploits of both guests and staff who spend a week at a global luxury resort chain called “The White Lotus”. Season 3 was filmed in Thailand and the cinematography was quite something. It’s basically a “who done it” with eccentric characters.
There is lots to digest every season, but the $5 million hush money payment in Season 3 was particularly interesting. In a nutshell, two of the characters in Season 3 were also in Season 2. One of them was a prime suspect in the murder of his wife and the other, while not a witness to the murder, was aware of the unusual circumstances surrounding the death. Suffice to say in Season 3 it becomes very obvious to the prime suspect, who has moved to Thailand to avoid investigation, that the person aware of his background knows who he is, what he did, and the fact that he is now hiding in Thailand and living the life of luxury (his deceased wife was wealthy).
In the end, the witness agrees to take $5 million to keep things quiet. She gives her account number and routing number to the suspect and, a few days later when she confirms that the $5 million has been wired to her account, she fades off into obscurity as part of the deal. Just for fun, let’s break down this $5 million hush money payment:
- Will this transaction be reported by the bank? Probably not, because the money was wired to the account instead of being deposited in cash. Banks are only required to report cash transactions exceeding $10,000 via a Currency Transaction Report to the IRS. This transaction would likely not be flagged by the bank.
- Is the transaction taxable? Yes, under a Supreme Court ruling in the 1950s, extortion payments are considered taxable income to the recipient. If this transaction occurred in real life the witness would have to report the proceeds as taxable income. This would not be considered a gift because legally a gift must be made clearly with donative intent and free of any expectation of anything in return. The witness’ silence is the quid pro quo here.
- Is the payment deductible? No. The suspect cannot consider this an ordinary and necessary business expense. This is a hush money payment under personal and non-business circumstances.
While the hush money payment in The White Lotus was purely fictional, it does raise some interesting questions that everyone needs to consider if they received a windfall, inheritance, intended gift, or in this case some kind of hush money payment. As for The White Lotus, I’m looking forward to Season 4. I’m told the setting might be Australia.
Fun Fact: For those of you intrigued by high-end luxury hotels, The Burj Al Arab in Dubai is the world’s first “seven-star hotel” i.e. the most luxurious hotel in the world. It includes a “pillow menu” with seventeen options, six high-end restaurants, a rooftop helipad, and a Rolls-Royce shuttle service from the airport. Each guest is given a 24-karat gold iPad upon arrival that is programmed to include access to all guest services and hotel information.
