IRS Examining Gifts, Loans to Reagans : Taxes: The investigation seeks to determine if the former President and his wife should be assessed for various items, particularly dresses for the former First Lady.

From The Washington Post

The Internal Revenue Service has been examining whether former President Ronald Reagan and his wife, Nancy, owe back taxes on gifts--including dresses for Mrs. Reagan--that they received while they were in the White House, according to sources familiar with the inquiry.

The investigation, which began early this year, has been conducted by the IRS's Los Angeles field office because the Reagans were determined to be California taxpayers even while living in the White House, the sources said.

Part of the IRS's information comes from M. Chris Blazakis, a free-lance journalist who previously worked for the designer Galanos, who lent dresses to Mrs. Reagan. Blazakis said that during the past year he has shared "detailed information with the IRS," which he said has launched a "comprehensive examination" of "far-reaching" issues involving the Reagans' possible tax liability.

Blazakis is now writing a critical book about the Reagans. He said he was coming forward with the allegations to ensure that they are properly handled by federal authorities.

The Reagans' tax lawyer, Los Angeles attorney Roy Miller, said he could not comment on a matter involving a client. The Reagans' spokesman, Mark Weinberg, said he knew nothing about an IRS inquiry and could not reach the Reagans for comment. A spokeswoman for the IRS also declined comment, citing privacy laws.

Jill Brett, a spokeswoman for the National Archives, said IRS agents recently examined Reagan White House photographs at the archives and made some copies. She said this was done with the former President's permission.

Documents seen by the Washington Post indicate that some IRS officials are treating the allegations seriously, have spent considerable amounts of time on the inquiry and have obtained permission from the Reagans to examine their tax records. The Post was shown these documents on condition that they not be further identified. Such cases are often resolved without court action in negotiated settlements with the IRS.

Blazakis is a former executive vice president of Galanos Originals, a California firm headed by designer James Galanos. Time magazine quoted Blazakis as a source for its October, 1988, report that Nancy Reagan had borrowed dozens of expensive gowns from famous designers, along with jewelry and other accessories.

The White House acknowledged at the time that the Reagans had not reported the gowns as loans on financial disclosure forms under the Ethics in Government Act, as Nancy Reagan had promised she would do in 1982, or declared their value as income on federal tax returns from 1982 through 1987.

Several tax experts interviewed by the Post last year said the dresses, some of which were worth $20,000, should be regarded as interest-free loans, and therefore taxable income, to Nancy Reagan.

But White House spokesman Marlin Fitzwater said last year that there was "no illegality" because the White House counsel's office had determined that there were no tax consequences from the transactions. Therefore, Fitzwater said, the Reagans did not need to amend their tax returns or financial disclosure statements.

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