The O’Shaughnessy family started a raucous tradition at its chain of Irish-themed restaurants, The Loaded Leprechaun. When customers enjoy their meal or feel particularly festive during happy hour, they are welcome to participate in the “Dollar Holler” – personalizing a dollar bill with a written message or picture in permanent marker and affixing it to the wall or any other surface as the staff lets out an appreciative yell.
The Leprechaun’s locations are loaded, to say the least, with the O’Shaughnessy family estimating that each of their seven locations contains roughly $1 million as wallpaper.
Your mind wanders: Seven locations, thousands upon thousands of bills … that’s a lot of money. What happens if the O’Shaughnessys remodel, sell the business or take down all of those greenbacks and start over? Is all of that currency usable, having been written on and exposed to years and years of grease and grime? Is all of that money income? Taxable income?
Don’t worry. The scenario is realistic, but The Loaded Leprechaun and the O’Shaughnessy clan are a bit o’ blarney dreamed up by Harbert College of Business School of Accountancy faculty members Kerry Inger, James Long, Tina Loraas and Jonathan Stanley to engage and challenge their students.
They wanted to develop a case study that would introduce student to some of the thorny accounting issues they may encounter in the real world. “We got to thinking, as any curious accountant, would, `What are the accounting implications of all that cash?’” Inger said.
In this particular scenario, the restaurant staff does not track the bills, other than reminding customers not to remove them from the walls, and the management ignores them for accounting purposes. Is it proper? It’s a gray area, and a great way to inspire accounting students to think critically about converging tax treatments:
- Writing on U.S. currency with a marker can be construed as defacement. Do these bills still count as legal tender?
- How should Loaded Leprechaun management account for “Dollar Holler” currency?
- How should the business report this money in financial statements?
- How should The Loaded Leprechaun report “Dollar Holler” transactions for federal income tax purposes?
Some of the answers remain gray. Section 333 of Title 18 of the United States Code focuses on defacing currency to render it “unfit to be reissued,” perhaps by obstructing denomination or serial number. The Bureau of Engraving and Printing considers a bill as legal tender as long as it’s not “mutilated,” meaning that currency can still be used if it’s “dirty, defaced, disintegrated … torn, worn” but otherwise recognizable. As for how the restaurant should treat “Dollar Holler” gifts, the faculty members concluded it would have to pay income tax under the “constructive receipt doctrine.”
“The most important takeaway is for our students to identify a variety of accounting issues: specifically legal, financial accounting, tax, and audit issues related to one transaction,” Inger said. “Students are able to see the interrelated nature of accounting, and that accounting issues are present where you might least expect them.”
So if someday you should find your pot of gold at the end of the rainbow, exercise caution. The IRS doesn’t believe in leprechauns.