30 Years Ago: IRS Tries to Sell Willie Nelson’s Memories, & Fails

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30 years ago this week, the biggest story in country music, and the biggest story in Texas and many parts beyond was the headlong effort by the IRS to liquidate the empire of Willie Nelson due to unpaid back taxes. They tried to sell his memories. It didn’t exactly go how the IRS planned.

On November 9th of 1990, the IRS had made aggressive moves against all of Willie Nelson’s assets, seizing his properties, raiding his Austin area home and studio, making off with instruments, musical equipment, furniture, mementos, Gold record plaques, and anything not nailed down that they could auction off for money. If it wasn’t for his daughter Lana rescuing Willie’s famous guitar Trigger from the grasp of the Federalies at the last minute, it would have been confiscated as well. “As long as I got my guitar,” Willie Nelson said at the time, “I’ll be fine … [It’s] just things, nothing that can’t be replaced.”

How Willie Nelson ended up owing some $16.7 million dollars to the Federal government is kind of a convoluted story, and it’s still questionable just how much Willie Nelson was at fault. The IRS first started questioning Willie Nelson’s taxes in 1984 when they saw a large deduction for a tax shelter investment. This wasn’t some fly-by-night scheme cooked up by a business manager to evade taxes though. It was a financial product offered publicly by the accounting firm Price Waterhouse that Willie had put his money in, believing it was a safe investment.

But the IRS saw it differently, and demanded Willie Nelson pay the $6 million he owed from the 1984 deduction. They also demanded he pay an additional $10 million in penalties and interest that he racked up going all the way back to 1972 after further investigations and audits into his financial records. Willie and his representatives weren’t sitting on their hands this whole time. They tried to work with the IRS, and the case was appealed to the Tax Court. Willie pleaded that the problem was the guidance by Price Waterhouse, but ultimately lost the case.

In August of 1990 ahead of the property seizures, Willie sued Price Waterhouse for $45 million for the “redress the loss suffered by him at the hands of the government, which penalized him for what amounts to misadvice given to him by Price Waterhouse.” Price Waterhouse said Willie buying into the tax shelter was his own decision, and they couldn’t be held accountable. That suit was later settled, but the details were never made public.

Why didn’t Willie just pay the IRS and get them off his back? It wasn’t that easy. Sure, Willie Nelson still had massive earning power in the early 90’s, but his commercial peak had come and passed. And through Willie’s heyday, money was going out just as fast as it was coming in, leaving little for savings. Also, throughout the IRS dispute, Willie was working under the idea that ultimately it would be resolved in his favor since in his mind, it was Price Waterhouse who was to blame. But that never happened, and as time went on, penalties and interest continued to accrue.

Even after Willie Nelson and his lawyer Jay Goldberg negotiated down the eventual tax bill to $6 million, Willie still couldn’t pay it off. “He didn’t have $1 million—he probably didn’t have $30,000,” daughter Lana Nelson told Texas Monthly at the time. Also, the seizing of musical equipment and assets made it harder for Willie to work to repay his debt.

So after the November 1990 raids, nearly everything owned by Willie Nelson was on the auction block the final week on January, 1991, with the IRS seeking the highest bidder. The federal government first put Willie’s 44-acre Austin-area property on the block on January 26th. He’d purchased the plot from the doctor that had delivered him as a baby. But unfortunately for the IRS, no bidders emerged. Not even one. So on subsequent days, they continued to offer the 44-acre property with 2-story house and horse stables to the public at an incredibly low starting bid. Still nobody showed up to purchase it, and no bids were entered.

The story was the same for numerous other properties Willie Nelson owned in Texas that the IRS was attempting to auction off. A sale of items taken from Willie’s country club and his Pedernales recording studio on January 23rd did bring in about $68,000 for the IRS, but some of the most important memorabilia from Willie’s estate—including posters, Gold record, and instruments—went untouched. The IRS was beginning to find out just how much Texas loved Willie Nelson.

Then finally on January 29th, 1991—the third day that the IRS listed Willie Nelson’s Austin ranch for sale—it went for the minimum bid of $203,840, which was well under market value, and well short of what the IRS was hoping for. Who was the buyer? It was a Willie Nelson fan who bought it at the behest of a group of farmers who Willie had helped over the years through his Farm Aid initiative. They would shortly sell it back to the country legend.

Seeing the writing on the wall, and perhaps having a change of heart, the IRS also decided to sell the remaining Willie Nelson items such as his Gold records and instruments to the “Willie Nelson and Friends Showcase” for $7,000. In short, the plan by the IRS to liquidate Willie Nelson’s assets to satisfy his tax bill was a colossal failure. Buyers in Texas refused to play ball.

″Everyone came to my defense and that was overwhelming,″ Willie said at the time.

But this wasn’t the case everywhere. A 44-acre estate in Evergreen, Colorado owned by Willie did sell for a handsome $650,000 to a construction entrepreneur named Everett Randleman whose family had owned the parcel before, and who outbid about 100 other prospective buyers who showed up to the IRS auction.

But Willie Nelson’s Texas home and some of his most prized possessions were saved. Nonetheless, there was still the lingering debt to the IRS that remained unresolved. So Willie Nelson rolled up his sleeves, and worked double time over the next few years to try and pay the IRS back. Willie paid the IRS some $6 million between 1990 and early 1993 to help pay down the debt.

Still though, an outstanding balance remained, so Willie Nelson and the IRS schemed to release the Willie Nelson album The IRS Tapes: Who’ll Buy My Memories? Basically a compilation album of some previously-released songs and a few new ones written by Willie (except one Hank Cochran co-write), it was released first by phone and mail-order in 1991.

The IRS Tapes was a first of its kind. Never before had an artist entered into a revenue sharing agreement with the IRS. A big marketing campaign, and the phone number 1-(800) IRS-TAPE was behind the album that sold for $19.95, only by phone.

Of the price, $9.95 went to the telemarketing company promoting the album, $1.60 went to album-related expenses, $2.49 went to Sony Records, and Nelson received $6—$3 to pay down his existing IRS debt, $1 to pay for his lawsuit against Price Waterhouse, and $2 for the tax that would be generated from the sale of the album. With the lion’s share being taken from the telemarketers, the album didn’t generate as much as expected. But when it received a wide release to stores in December of 1992 without the telemarketing cut, it fared much better.

The IRS Tapes: Who’ll Buy My Memories? eventually generated $3.6 million for the IRS, and over the next few years, Willie paid a total of $9 million to finally satisfy his IRS tax burden.

Willie Nelson’s battle royale with the IRS has since become the stuff of legend. The IRS tried to sell Willie Nelson’s memories, but Texas wasn’t buying.

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