January 19, 1995
Digest: A judge's activity in buying and selling oriental carpets incidental to a hobby as a collector, may constitute an impermissible business activity, depending upon the extent and frequency of such transactions.
Rule: 22 NYCRR 100.5(c)(2)
A full-time judge reports that he/she, as a hobby, collects oriental carpets which have been purchased from a variety of sources. The judge intends to “sell some of them to other collectors and/or dealers in order to get rid of my mistakes, pay for new carpets and make room in my home.” The judge's accountant has advised that a Schedule C should be filed with the judge's tax return for 1994, reporting any profit or loss from the purchase and sale of the carpets in the collection. Further, the accountant has also advised that the judge file for IRS and New York State tax numbers “in order to substantiate my status as a bonafide collector of oriental carpets.”
The judge inquires as to whether engaging in such transaction, as described, and the filing of a Schedule C and applying for tax identification numbers violate any ethical rules.
Section 100.5(c)(2) of the Rules of the Chief Administrator states that “No full-time judge shall be a managing or active participant in any form of business enterprise organized for profit..” Whether the inquiring judge’s activities as a collector, which includes the buying and selling of carpets amounts to a “form of business enterprise organized for profit” seems to present a question of fact and of degree involving such considerations as frequency of sales and continuity. Based on the information supplied, the Committee is not in a position to reach any conclusion in that regard, which would require a much more detailed inquiry as to the facts. However, in this connection it would make no difference whether the activity is of a retail or wholesale nature.
As to the filing of a Schedule C and obtaining tax identification numbers, the Committee expresses no views on what are essentially questions of the applicability of tax laws. If the relevant tax codes require the filing of such forms, obviously the inquirer must comply, regardless of any concern as to the significance, if any, that such filing may have in relation to the Rules Governing Judicial Conduct.