In Uncategorized on 07/29/2015 at 15:31

Is the key to deciding whether a proposed amendment to a pleading is an ambush.

On a slow day in Tax Court (no opinions, no really toothsome orders), STJ Lewis (“The Name”) Carluzzo has a designated hitter, Jeremy Edwin Porter & Ruth Ann Porter, Docket No. 16966-14, filed 7/29/15.

The Porters object to IRS’s amending its answer out of time, to allege Section 6663 fraud chops. That’s the 75% solution, and it can really sting.

IRS needs leave of court, of course, because more than thirty days have gone by since the last pleading.

But the liberals (not the political ones) have it.

“In general, after a responsive pleading has been served, or if after 30 days no responsive pleading is permitted, ‘a party may amend a pleading only by leave of Court or by written consent of the adverse party, and leave shall be given freely when justice so requires.’ Rule 41(a). That Rule reflects ‘a liberal attitude toward amendment of pleadings.’ 60 T.C. 1089 (explanatory note accompanying promulgation of Rule 41). Petitioners have not consented to the amendment.” Order, at p. 1.

Judge, I don’t know that I would consent, either.

But the case hasn’t been set for trial, and the Porters don’t show unfair surprise, disadvantage or prejudice. So it seems they have time to prepare a defense to IRS’s attempt to show the clear and convincing evidence necessary to sustain the fraud chops.

And that seems to be the test.


In Uncategorized on 07/28/2015 at 18:01

No, not the religious group. This blogpost is about the minimum five percent of net asset value of a NIMCRUT, calculated annually, required to be distributed each year in order to make sure the charitable remainderer gets at least 10% of NAV, calculated at inception.

Since the noncharitable income beneficiaries could get enough more (with a catch-up in any year when the assets didn’t yield the required distribution, thus making the Charitable Remainder Unitrusts, or CRUTs, into Net Income with Make-up Charitable Remainder Unitrusts, or NIMCRUTs) to torpedo the charitables at the end of the twenty-year income stream, no charitable deduction for the remainder claimed by Estate of Arthur E. Schaefer, Deceased, Kathleen J. Wells, Executor, 145 T. C. 4, filed 7/28/15.

Section 664 and the regs are not models of clarity, but Judge Buch finds the Senate memo shows what Congress intended, and gives it weight.

“A second modification of the annuity trust and unitrust rules made by the committee provides that the charitable remainder trust must be required by the trust instrument to distribute each year 5 percent of the net fair market value of its assets (valued annually in the case of a unitrust and valued at the time of the contribution in the case of an annuity trust) or the amount of the trust income, whichever is lower. In valuing the amount of a charitable contributions deduction in the case of a remainder interest given to charity in the form of an annuity trust or a unitrust, it is to be computed on the basis that the income beneficiary of the trust will receive each year the higher of 5 percent of the net fair market value of the trust assets or the payment provided for in the trust instrument. * * * S. Rept. No. 91-552, supra at 89-90, 1969-3 C.B. at 481 (emphasis added).” 145 T. C. 4, at .pp. 14-15.

IRS issued Rev. Ruls. and Rev. Procs following that lead, although the regs aren’t clear, and the Code is not much better. So IRS’s guidance gets Skidmore deference.

Clear? Thought not.


In Uncategorized on 07/28/2015 at 17:37

The Section 7206 plea-cop is a minefield. I blogged this once already; see my blogpost “A Cool Cat,” 4/16/13.

But Husam A. Abu-Dayeh 2015 T. C. Memo. 136, filed 7/28/15, and his attorney (whom I’ll not name, as he will probably suffer, or has already suffered, enough) obviously missed my blogpost, because Husam copped to one count of a Section 7206(2) rap for writing fiction on Forms 1040, but got hit with civil penalties thereafter.

The Federales hit Husam for a cool $79K in losses to the fisc by reason of Husam’s chicanery regarding some 36 (or maybe 39) spurious returns Husam’s taxprep business prepared and filed.

Comes now IRS and nails Husam for $39K in $1K increments, the civil preparer penalties.

Husam and lawyer yell they gave at the office. No says IRS, read your plea bargain. And if you don’t, Judge Nega will read it for you.

“The plea agreement specifically states that it is ‘limited to the Office of the United States Attorney for the Middle District of Florida and cannot bind other federal, state, or local prosecuting authorities’. The plea agreement is a total of 12 pages, all of which are initialed or signed by petitioner except for page 10. Page 10 contains an explicit statement of petitioner’s guilt in filing materially false tax returns: ‘[D]efendant is pleading guilty because defendant is in fact guilty.’” 2015 T. C. Memo. 136, at p. 3.

Husam tries to get a CDP on his own, but his OIC is defective (no first payment, no income certification and no fee). And the first AO he spoke to cut the penalties from $39K to $36K.

Judge Nega concludes: “While we understand petitioner’s frustration at having been assessed penalties after he paid restitution to the IRS, SO X followed the requirements of section 6330(c), and her decision to uphold the NFTL was not an abuse of discretion.” 2015 T. C. Memo. 136, at p. 10. (Name omitted).

Criminal defense lawyers, read those plea agreements. Make sure they cover Treasury and IRS civil and criminal penalties. Merely covering DOJ or the US Attorney is not enough, unless you’ve warned your client and have informed written consent to go ahead.

And tell ‘em Husam sent you.


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