The Shawshank Redemption is one of the most peculiarly loved films of all-time. Something about a clever man dreaming behind bars speaks to more people than I would’ve ever thought possible. But Rita Hayworth and I have one little question about a pivotal plot point: Was Andy Dufresne’s tax advice to the Captain Hadley bullshit?
Here’s how it goes: It is 1949, and atop a roof at the Shawshank Prison, Captain Hadley loudly groans that he has inherited $35,000 from his brother, but he is livid that the government is going to “take a big wet bite out of [his] ass” in taxes.
Prisoner Andy Dufresne dangerously interjects himself into the conversation insisting that the Warden need not suffer any tax burden at all, suggesting:
“If you want to keep that money, all of it, just give it to your wife. See, the IRS allows you a one-time-only gift to your spouse. It’s good up to $60,000…Tax-free. IRS can’t touch one cent.”
But is that true? Or was it at least true in 1949? Or was Andy just bullshitting for some beers and the fun of it. Let’s take a look at the tax law to understand.
One reason this plot line may have crept into the deliciously warped mind of Stephen King (and therefore, that of character Andy Dufresne) is because there was a major reform of the United States Tax Code in 1948, specifically impacting estate and gift taxes–including marital exemptions. But did it provide a tax shelter for Captain Hadley’s inheritance?