Attorneys-at-Law

AN UNERRING NOSE FOR FRAUD

In Uncategorized on 02/27/2015 at 15:33

That’s Gregory Raifman & Susan Raifman, Docket No. 3897-14, filed 2/27/15. Greg & Sue can spot a crook a mile away–and hand him millions.

You’ll remember Greg & Sue from my blogpost “We Wuz Robbed”, 8/7/12. What, you don’t remember? Then check out my blogpost aforementioned, as Judge Wells allowed that Greg & Sue were well and truly robbed by the improbably-named-but-larcenously-inclined Yuri Debevc Derivium.

Would you believe that Greg & Sue handed over $2,475,000 to ClassicStar? And if you don’t remember ClassicStar, dig my blogpost “Horsing Around?”, 8/15/11.

Well, today Greg & Sue want summary J allowing the $2,475,000 loss to the ClassicStar swindlers as a carryback from 2009 (a year not at issue) to 2008. IRS balks, but Judge Wells, by now almost an old friend of Greg’s & Sue’s, lets them carry back.

“Generally, this Court has jurisdiction to consider later years not before the Court as may be necessary to correctly redetermine the deficiency for years currently before the Court. I.R.C. sec. 6214(b); Vincentini v. Commissioner, T.C. Memo. 2008-271. Accordingly, this Court may consider petitioners’ 2009 tax year in order to redetermine the correct amount of the theft loss carryback for 2008.” Order, at p. 1.

So Greg & Sue are leading in the backstretch.

But I regret that they, like me, have torn up tickets on horses leading on the backstretch that never quite led at the finish line.

Greg & Sue want to claim they were victims of a Rev. Proc. 2009-20, 2009-14 IRB 735 “specified fraudulent arrangement”. This would get them a theft-loss ordinary deduction, rather than a capital loss.

IRS concedes Greg & Sue were robbed (again), but claims no summary J on “specified fraudulent arrangement.”

Greg & Sue rely on a USDCWDKY trial of the ClassicStar gang.

The KY trial doesn’t establish that ClassicStar promised income to the swindled, nor that they reported to them or paid to them any purported “income”. The “specified fraudulent arrangement” gambit is strictly for Madoff-Ponzi deals, and the KY trial, on which Greg & Sue hang their harness, doesn’t establish anything other than fraudulent representations, but no rob-Peter-to-pay-Paul of the Madoff-Ponzi kind.

So Greg & Sue were robbed (again). But not through a “specified fraudulent arrangement.”

“SUCH RAREFIED HEIGHTS OF PURE MATHEMATICS” – PART DEUX

In Uncategorized on 02/27/2015 at 14:30

The “rarefied heights” were there, sure enough, in Judge Morrison’s opinion in Estate of Natale B. Giustina, Laraway Michael Giustina, Ex’r (as to which see my blogpost “Such Rarefied Heights of Pure Mathematics”, 6/25/11), but Ninth Circuit found that mathematics wasn’t enough.

As I said back in 2011, “Judge Morrison finds a sale would yield more present value dollars than continuing lumbering operations, finding the probability of the sale sufficiently high to justify a valuation taking that probability into account.”

Ninth Circuit was less than overwhelmed by Judge Morrison’s oddsmaking.

“The Tax Court concluded that there was a 25% likelihood of liquidation of the partnership. It therefore gave a 25% weight to an asset-based valuation and a 75% weight to the valuation of the partnership as a going concern. Although the Tax Court recognized that the owner of the limited interest could not unilaterally force liquidation, it concluded that the owner of that interest could form a two-thirds voting bloc with other limited partners to do so, and assigned a 25% probability to this occurrence. This conclusion is contrary to the evidence in the record. In order for liquidation to occur, we must assume that (1) a hypothetical buyer would somehow obtain admission as a limited partner from the general partners, who have repeatedly emphasized the importance that they place upon continued operation of the partnership; (2) the buyer would then turn around and seek dissolution of the partnership or removal of the general partners who just approved his admission to the partnership; and (3) the buyer would manage to convince at least two (or possibly more) other limited partners to go along, despite the fact that ‘no limited partner ever asked or ever discussed the sale of an interest.’ Alternatively, we must assume that the existing limited partners, or their heirs or assigns, owning two-thirds of the partnership, would seek dissolution. We conclude that it was clear error to assign a 25% likelihood to these hypothetical events. As in Estate of Simplot v. Commissioner, 249 F.3d 1191, 1195 (9th Cir. 2001), the Tax Court engaged in ‘imaginary scenarios as to who a purchaser might be, how long the purchaser would be willing to wait without any return on his investment, and what combinations the purchaser might be able to effect’ with the existing partners.” Estate of Giustina v. Com’r, No. 12-71747, 9th Cir., decided 12/5/14, at pp.2-3.

So Judge Morrison’s scenario is tossed, and back to Tax Court and Judge Morrison goes Laraway for a replay.

But Judge Morrison is looking for a punt on the rarefied pure mathematics.

“Because the remand by the Ninth Circuit contemplates further explanation from the Tax Court of an aspect of its prior opinion, the Court will issue a supplemental opinion. In the meantime, the parties are free-as always-to negotiate a settlement. The parties are to advise the Tax Court of any settlement by filing status reports on or before 60 days after the issuance of the mandate.” Estate Of Natale B. Giustina, Deceased, Laraway Michael Giustina, Executor, Docket No. 10983-09, filed 2/27/15, at p. 2.

STILL ON PATROL

In Uncategorized on 02/27/2015 at 13:38

Off-Topic

As one of his multitude of fans, I very much regret the death of Leonard Nimoy. Now he is free to roam among the stars, with Bones and Scotty.

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