Walt Eddy's Blog

When unhappy with his press release, Ralph rewroteit and sent changes to Northwest. When dissatisfied with Northwest's marketing,he wrote demanding that they comply with the terms of their agreement.
By letter dated January 22, 1996, Northwest'saccount executive told Ralph that 6,800 copies of Searchlight, Nevada had been ordered and shipped. It didn't say whoplaced the orders or where they shipped them, but said that another 2,500 copies had been ordered by thechain Books A Million. Northwest promised royalty statements in about threeweeks.
On his 1996 Form 1040, Ralph reported $2,600 ingross royalties from his writing activity.
In late 1993, after signing with Northwest for Searchlight, Nevada, Ralph began researching Nevada Nights, San Joaquin Dawn. He wanted to document the difficulties that womenface when attempting a break from prostitution. "The story's never been donebefore to any degree of authenticity," he said, explaining that he thought itwas commercially viable.
Ralph, however, had learned that rooms at brothelswere equipped with listening devices. Therefore he met prostitutes at otherlocations on "out calls," paying by credit card. In 1994, during January, February,April, May, June, and July, he spent from one to six days a month in Nevada on "out calls."He successfully encouraged ten prostitutes to leave their profession. As of histrial, he hadn't finished NevadaNights, San Joaquin Dawn.
Some time after signing with Northwest on Searchlight, Nevada, Ralph submitted the 450-page Lightning at Dawn. He thought that Northwest only required a jointventure payment for first novels, and so if Northwest agreed to publish Lightning at Dawn, he'd not have to pay anything. He also triedmarketing Boys and Girls Together, but stopped when he was told that there was noneed or market for that type of short stories at the time.

Ralph and Northwest reached an agreement forpublication of Searchlight,Nevada on October 13, 1993. This agreement had Ralph paying Northwest $4,375 topublish ten thousand copies. Northwest's marketing director wrote Ralphconfirming receipt of Ralph's money and described it as a "joint-venturepayment." The company's operations officer explained via letter that Ralph'spayment represented about a fourth of production and marketing costs for tenthousand copies.
The agreement required Northwest to give a hundred"free" copies to Ralph and two hundred to major bookstores and book reviewers,to sell 2,500 copies through its "test market program," and to sell theremaining books in the retail marketplace.
Ralph was to get forty percent of the retail amountof each book sold through the test market program and a royalty of fifteenpercent of the retail price of remaining books sold to bookstores andwholesalers.
Northwest was expected to pay royalties January 31stand July 31st each year along with interest for late payments. Itwould do a certain amount of sales promotion, advertising, and publicity. Itwas to have exclusive rights to the book.
Northwest representatives told Ralph that his bookwould probably earn him at least $20,000 in royalties.
Northwest published and released the 131-page Searchlight, Nevada in December 1995 with a retail price of $7.95. Thebook went on sale at Barnes & Noble Booksellers in Boynton Beach, Florida, and Falls Church, Virginia,and at Super Crown Books, store #106. People could also acquire it in Bailey'sCrossroads, Virginia,by special order through Borders Books and Music.
Prior to its release, Ralph worked in all stages ofpublication. In 1994, having reviewed its galley proofs, he asked about addingtwo chapters. By letter at the end of February 1995, he suggested cover designsand attached pictures, showing how he thought characters on the cover shouldlook. He promised to provide any additional assistance he could, saying that herealized the cover design equaled the storyline in importance. It didn't matterif the story was good if readers failed to buy it. Optimistic about the jointventure, he believed they'd have a "hot seller" and sell over 100,000 copies.
Ralph gave Northwest's public relations departmentmailing lists and telephone numbers of bookstores, newspapers, magazines, andradio and motion picture companies. On his own, he mailed about sixtycomplimentary copies of the book along with individualized letters tobookstores, newspapers, magazines, and hotels. He worked with Northwest'smarketing expert to get it stocked with distributors and to set up booksignings at major bookstores.

Ralphresolved to write a story about the adventures of two men who travel across thecountry to patronize Nevadabrothels, where such establishments are—ahem—legal. In early 1993, Ralphdrafted an 18,000-word basic storyline. He submitted his draft along with Lightningat Dawn and Boys and GirlsTogether in June for copyright protection.Ostensibly to make the story realistic and to develop characters with fidelity,Ralph visited numerous legal brothels in Nevadaas a "customer." Ican hear cogs in your mind working. If you're like most, you're saying, "Nevermind telling me about deducting traveling expenses for going to Vietnam toobtain motorcycle pictures for a picture book." A more vital question is: couldRalph deduct thosecosts? Well, we'll see.Ralph wrote in his journal. Note that, to Ralph'scredit, he kept a non-financial contemporaneous record. He wrote about hispersonal experiences at these—excuse me—whorehouses. He chronicled whichbordellos he visited, the dates and even, sometimes, the hours.Ralph's notes described prostitutes he met and theamounts of lucre he paid. For each journal entry, Ralph wrote about thesevisits, about what happens at cathouses (Like people don't know?). Forinstance, Ralph described selecting his strumpets, the "house rules,"negotiating prices for a gal's time, their discourse—yes, discourse, not someother course—and the ladies' clothing. He included personal information on hiscourtesans, including age, physical characteristics, place of residence,religion, ethnicity, education, and names and ages of offspring.Ralph's journal indicates that, at some point duringsaid encounters, he told the demimonde he was writing a book about Nevada's bordellos. Hewanted to use them as characters.The journal shows that during 1993 Ralph spent aboutthree days a month—except in February, May, and December—meeting prostitutes atbrothels. Using materials so gathered, he produced Searchlight, Nevada. Anxious to sell his work, Ralphconsulted the 1993 Writer's Market.There he read about Northwest Publishing, Inc. Northwest's entry stated that itpublished hardcover, trade paperback, and mass market originals and reprints,between forty and fifty titles a year on seven to eight hundred queries andfive hundred manuscripts a year. Some eighty-five percent of said manuscriptscame from first-time authors and ninety-five percent came from unagentedwriters. Northwest said that it paid a ten to fifteen percent royalty on retailprice, publishing books four months after acceptance of submitted manuscripts.

Ralphresolved to write a story about the adventures of two men who travel across thecountry to patronize Nevadabrothels, where such establishments are—ahem—legal. In early 1993, Ralphdrafted an 18,000-word basic storyline. He submitted his draft along with Lightningat Dawn and Boys and GirlsTogether in June for copyright protection.Ostensibly to make the story realistic and to develop characters with fidelity,Ralph visited numerous legal brothels in Nevadaas a "customer." Ican hear cogs in your mind working. If you're like most, you're saying, "Nevermind telling me about deducting traveling expenses for going to Vietnam toobtain motorcycle pictures for a picture book." A more vital question is: couldRalph deduct thosecosts? Well, we'll see.Ralph wrote in his journal. Note that, to Ralph'scredit, he kept a non-financial contemporaneous record. He wrote about hispersonal experiences at these—excuse me—whorehouses. He chronicled whichbordellos he visited, the dates and even, sometimes, the hours.Ralph's notes described prostitutes he met and theamounts of lucre he paid. For each journal entry, Ralph wrote about thesevisits, about what happens at cathouses (Like people don't know?). Forinstance, Ralph described selecting his strumpets, the "house rules,"negotiating prices for a gal's time, their discourse—yes, discourse, not someother course—and the ladies' clothing. He included personal information on hiscourtesans, including age, physical characteristics, place of residence,religion, ethnicity, education, and names and ages of offspring.Ralph's journal indicates that, at some point duringsaid encounters, he told the demimonde he was writing a book about Nevada's bordellos. Hewanted to use them as characters.The journal shows that during 1993 Ralph spent aboutthree days a month—except in February, May, and December—meeting prostitutes atbrothels. Using materials so gathered, he produced Searchlight, Nevada. Anxious to sell his work, Ralphconsulted the 1993 Writer's Market.There he read about Northwest Publishing, Inc. Northwest's entry stated that itpublished hardcover, trade paperback, and mass market originals and reprints,between forty and fifty titles a year on seven to eight hundred queries andfive hundred manuscripts a year. Some eighty-five percent of said manuscriptscame from first-time authors and ninety-five percent came from unagentedwriters. Northwest said that it paid a ten to fifteen percent royalty on retailprice, publishing books four months after acceptance of submitted manuscripts.

Ralph, like me, had worked for the Treasury Department, although he didn't work for the IRS, which is an agency within Treasury. His work as a budget analyst followed his graduation from the University of Maryland with a bachelor's degree in marketing and advertising, augmented by twenty-four credit hours of English, journalism, and speech.
He retired from Treasury in January 1997 with 35 years of service. Part of his job (one of six critical elements) required him to "write budget justifications, procedures, and other written material by applying professional-level writing ability to create high-quality written work." (Certainly Ralph wouldn't have had the subject matter to write much of a thriller, but maybe he had a sense of humor. It was a bureaucracy, after all.)
Just before Ralph retired, his manager rated Ralph's performance "outstanding" in this "writing" element. "Outstanding" exceeded "excellent" under this system. Go figure.
Anyway, in Ralph's employment, "excellent" meant writing budget justifications, statistical reports, procedures, guidelines, and other written materials clearly, concisely, and correctly. It included:
•      Using excellent grammar and spelling.
•      Communicating ideas effectively, especially narratives.
•      Presenting ideas clearly so recipients asked few follow-up questions.
•      Structuring paragraphs and sentences correctly.
•      Working independently in drafting material and seeking guidance only when goals changed.
•      Recipients receiving well and acting upon the written budget justifications.
•      Doing only one revision per finished product.


Our man Ralph did even better than all of that since he received "outstanding" ratings. It was like getting an "A" plus-plus, I guess.
Ralph's office staff, mostly accountants, used Ralph to do their writing. He contributed to a comprehensive agency-wide report in which agencies evaluated internal control and accounting systems. He edited the in-house newsletter of Treasury. So Ralph brought writing skill and experience to the table.
In 1992, about two years before he was eligible to retire, Ralph started writing outside his Treasury job. Fearful of retirement, he told the IRS and the court that he had hoped to make writing a second career. His first book-length manuscript of fiction was Lightning at Dawn. Later that year he wrote a collection of short stories called Boys and Girls Together. Before marketing these manuscripts for publication, he had an idea for another book.
Now what I'm about to tell you may seem incongruent for a bureaucrat like Ralph who worked for Treasury with a bunch of accountants writing staid budget proposals. He was at least fifty-five years old, maybe older.
Don't be too surprised.
Tune in next time for a shock.

You know, there’s a plethora of wisecracks about tax auditors. For instance, one says that the Postal Service just recalled its newest stamps because they picture famous IRS agents on them. People couldn't figure out on which side to spit. Another witticism asks, “What do you call twenty-five IRS agents buried up to their chins in cement?”

“Inadequate cement.”

Venting frustration through humor makes sense. An additional way to vent is to turn the tables on a tax auditor with solid documentation of your hard work and preparation, enabling you to claim a few of the tax perks for self-employed persons. Of course, the ruling administration always claims that the IRS is simply liberating people—primarily, the working middle and lower classes—from fiscal burden.

A tax case involving a writing activity played out in Tax Court in Arlington, Virginia, the case of Ralph Louis Vitale, Jr.1 Let’s look at it relative to preparation and expertise. I don’t know if Mr. Vitale goes by Ralph or Louis or some other appellation among friends and acquaintances, but I’d like to call him Ralph. It seems such an improbable name for what his writing focused on after retirement. To me his last name, Vitale—reminding me of “vital” or “vitality”—seems more apropos. Anyway, the guy had verve, although some might say he was just libidinous. You be the judge.

Let me give you the facts in the next posting.

1 Ralph Louis Vitale, Jr. v. Commissioner, TC Memo. 1999-131 affirmed by unpublished opinion of the Fourth Circuit at 217 F.3d 843.

It is no small thing to draft a book, and there is little doubt Sarah worked at her writing activity. What should Sarah have done differently? Here are some suggestions.
·       From 1976 to 1980, even while working for Yale as a research associate and computer programmer, if she intended to write for profit in the future, she should have:
o   Begun writing
o   Taken pertinent classes
o   Formulated a business plan
o   Joined and participated in a writer's league
o   Attended writer's conferences
o   Joined a critiquing group
o   Started submitting pieces to contests and publishers
·       When she learned of the publisher of travel guides who needed information for a revision to an African travel guide and contacted the firm and received information regarding submissions, she should have incorporated such into her plan and followed up or explained why she hadn't.
·       While in Africa and Israel and employed by Weizmann, Sarah should have tracked her writing efforts, logging typewriter use, research time and efforts, and any other efforts she expended to write her draft based upon her adventures there. Did she work eight hours a day for her employer and write for one hour a day? She should have kept financial and non-financial records of writing activities. Also, she should have modeled an exemplar, someone who had already sold well and made lots of money in her genre— Bill Bryson, who wrote A Walk in the Woods and, much later, In a Sunburned Country comes to mind. At the same time she should have retained her originality and voice and planned how her work could compete or fill a new niche. (It's hard to convince the IRS or the Tax Court that you moved somewhere to gather writing materials to write a particular piece of fiction while you're making substantial wages from your employer. That's especially true if the wages you make are substantial compared to the revenue or potential revenue of writing.)
·       Sarah should have gotten her work published. At the very least, she should have shown she consumed herself trying and that she had an alternative business plan to market it. It wouldn't hurt, for example, to show that she could at worst self-publish and peddle her work. Potentially, then she could eventually generate revenues like forerunner Bill Bryson. (Of course, her writing skill would have to rival or exceed his—perhaps this would be another goal for her business plan.)

Consider Sarah Lesher, who had had a couple of appalling encounters with the IRS, partly because she didn't adequately prepare.


From 1976 to 1980, Sarah worked for Yale as a research associate and computer programmer. When she learned of a publisher of travel guides in need of information for a revised edition of an African travel guide, she contacted the publisher and received information regarding the submission of articles.

Sarah traveled to Africa in October 1980 and then to Israel in Janu...

An old story has a businessman boasting to his competitor, "Tax day is coming next week. Yep, good old April 15th—that particular day used to scare the pants off me. But you know what? I don't pay the tax man anymore. KPMG did my return this year. I'm getting a refund of $4 billion."


Preparation and expertise. Let's get a little more know-how under our belts, and not the type that the businessman boasts about in the gag. Too many taxpayers rely on complicated schemes without real substance and...

Some years ago Bill Maher fantasized a tax return of repute, saying George W. Bush's tax returns were a bit different. He claimed the President wrote off the Christian Right as dependents, declared the 2000 election as a gift, and tried to claim the mileage he got from 9/11. Bill, of course, was joking around, fabricating. Don't make your return that reports your expression activity a truth stranger than fiction, worthy of ridicule by taxing authorities. The Tax Court said:


The purpose of main...