In Uncategorized on 03/30/2017 at 16:52

Nicola Francesco Haym’s words echo in Judge Cohen’s court, unfortunately without G. F. Handel’s wonderful music, in Albert Okorogu and Rita Okorogu, 2017 T. C. Memo. 53, filed 3/30/17.

Al’s a real bad dude, landing Dr Rita in the emergency room on one occasion when he broke her back, and frequently beating her up in front of their kids, for which he did time for misdemeanor battery.

He’s lucky I wasn’t the judge.

He’s also a creative writer on tax returns, two of which (for the years at issue) are electronically filed MFJ. Dr Rita claims Al never showed her family finances, she never signed the returns,  and Al forged her name on a deed quitclaiming her share in their house to some kind of trust.

Dr Rita did work, but got laid off. Al worked, and also got laid off. All collected unemployment insurance, which he didn’t report. Dr Rita claims she didn’t know she had to pay income tax.

I’m not so sure as Judge Cohen about that last one, but we’ll let that pass.

IRS slugs Al and Dr Rita with a SNOD, but he’s out of the country (although Dr Rita claims he comes back from time to time). They both petition the SNOD with same counsel, but Dr Rita ultimately gets her own lawyer, and claims innocent spousery. IRS agrees; no one contradicts her tale of abuse.

Of course, Dr Rita has no info as to the contents of said returns, and Al is AWOL, so Judge Cohen finds for IRS on the deficiencies and the chops. Dr Rita admits to $16 of interest on which she owes tax, so she can’t get full remission of joint-and-several. Section 6015(b) and Section 6015(c) are therefore both off the table. Dr Rita does want Section 6015(f), but there’s a problem.

Al’s counsel claims Dr Rita’s testimony shows no intent to file MFJ, therefore Section 6015(f) is also off the table. I will give counsel a Taishoff “good try” third class; he’s representing a nasty character, but he has to try, even though it’s a slimy move.

“W [Dr Rita] asserts, and respondent [IRS] concedes, that she meets the criteria for relief outlined by Rev. Proc. 2013-34, supra, and that she should be granted full relief from the liabilities determined in the notice.  However, before we render a determination on the merits of W’s claim for equitable relief, we must determine whether the returns filed for petitioners…were valid joint returns. Equitable relief can be granted only for an individual who ‘has made a joint return’.  Sec. 6015(a)(1); see also Rev. Proc. 2013-34, sec. 4.01(1), 2013-43 I.R.B. at 399.  H opposes our granting of equitable relief for W on the ground that the returns that he caused to be filed for himself and W for the years in issue were not valid joint returns.” 2017 T. C. Memo. 53, at p.18.

And Dr Rita’s 8857 request says that she never signed the 1040s at issue, therefore, says Al’s counsel, their real status is MFS, and the tax burdens must be apportioned as if they filed MFS.

“W and respondent argue that although W did not sign and did not expressly agree to H’s filing of the returns for 2011 and 2012, the returns were valid joint returns because W tacitly consented to the filing of joint returns by H.” 2017 T. C. Memo. 53, at pp. 18-19.

Tacit consent? See my blogpost “The Scarlet Letter,” 10/13/15. Didn’t Judge Laro blow up the idea of tacit consent as undermining the whole tax structure? Wouldn’t IRS be involved in a wilderness of facts-and-circumstances, and wouldn’t spouses who never knew what return was filed find themselves under the gun years later, trying to prove who intended what when?

Yes, but. As Judge Laro said, when joint and several liability is concerned, tacit consent does go back on the table

And Dr Rita has it.

“The ‘tacit consent rule’ holds that the intent to file a joint return may be inferred from facts demonstrating that a nonsigning spouse tacitly approved or acquiesced in the other spouse’s filing of the joint return. This Court has considered a variety of factors in evaluating the issue of tacit consent, especially whether the nonsigning spouse filed a separate return, whether the nonsigning spouse objected to the other spouse’s joint filing, and whether the couple’s prior filing history indicates the intent to file jointly.  Thus, a history of reliance by the nonsigning spouse on the other spouse with respect to family financial matters, including the preparation of tax returns, suggests that the nonsigning spouse consented to the other spouse’s filing of the return in question.   Furthermore, the inclusion of income and deductions attributable to the nonsigning spouse on the return generally will be taken as proof of the intent to file a joint return, even where the nonsigning spouse failed to give his or her express consent to the filing.” 2017 T. C. Memo. 53, at pp. 19-20. (Citations omitted, but get them for your next memo of law).

But remember my blogpost abovecited; this only works in a joint-and-several innocent spousery, where equitable considerations can outweigh the plain facts. This may be the only place where Tax Court has explicit statutory equitable jurisdiction.

Judge Cohen knows this is an off-the-wall case, and stretches to find any guidance.

But ultimately, this case is decided on the proposition that Al is a noxious individual, and Judge Cohen hasn’t got Rudy Kipling’s horsewhip.

“W’s testimony and supporting documentation that she provided establishes that she suffered from near constant emotional and physical abuse during the time that H lived with her and the children in California.  H strictly and secretively controlled the family’s finances, and W reasonably feared his retaliation for any attempt to question or challenge his decisions.  After H moved to Nigeria…, he continued to instill fear in and exercise control over W and the children.  We accept W’s testimony that she remains fearful of his retaliation to this day.  H’s counsel’s attempts to discredit W’s testimony to this effect, arguing that H was physically removed from the household and that W had control over her own bank account…, ignore the realities of an abusive relationship and the fact that H returned to California multiple times during this period.  There is no evidence supporting H’s arguments or contradicting W’s testimony.  His position in this case appears simply vindictive.” 2017 T. C. Memo. 53, at pp. 24-25.

Though consent was given silently and stealthily, it was still consent. Judge Cohen plays “l’astuto cacciator’.”


In Uncategorized on 03/29/2017 at 17:27

Alex, let’s take jurisdiction for $13 million. Our lead contestant is George B. Dengin, Docket No. 5822-17, filed 3/29/17.

IRS claims Geo owes about $13 million in tax for five (count ‘em, five) tax years, for which he neither timely filed nor paid. Geo is a dual US-Canadian national, and apparently lives in Vancouver, in the Terre de nos aïeux. Geo and counsel went to Appeals on the jeopardy assessment, but Appeals sustained.

Now Geo and counsel want Tax Court to review, but Ch J L Paige (“Iron Fist”) Marvel says “no can do.”

“Section 7429 deals with review of jeopardy assessment and jeopardy levy procedures. Subsection (a) provides for administrative review, and subsection (b) provides for judicial review. As a general rule, section 7429(b)(2)(A) vests the district courts of the United States with exclusive jurisdiction over civil actions for review of jeopardy assessments and levies. However, there is an exception to the general rule applicable to the Tax Court, but the exception applies only if (among other requirements) the commencement of a redetermination action under section 6213(a) in the Tax Court occurs before the making of the jeopardy assessment or levy. Sec. 7429(b)(2)(B).” Order, at p. 3. (Emphasis by the Court).

But here the jeopardy assessment came first, so Tax Court is ousted of its standard deficiency jurisdiction. Apparently Congress doesn’t trust the “small court” when it comes to skipping dodgers.

So the hard-laboring Clerk of Tax Court must overnight the file to USDCCDCA (where Geo and counsel want to try the case), and send an electronic smoke signal to the clerk of that court and her assistant, telling them to stand by.

Interestingly, Ch J Iron Fist doesn’t require the Tax Court clerk to use one of the overnight services blessed by Com’r John (“Kosy”) Koskinen.


In Uncategorized on 03/29/2017 at 17:04

It’s been a while since a restitution and assessment opinion came down the pike, but Judge Goeke has one for us today. It’s Leif D. Rozin, 2017 T. C. Memo. 52, filed 3/29/17.

Leif got nailed for filing a false return, and the nailing included a restitution order for $775K. Leif and co-defendants paid this off within a year.

Fast forward a year, and IRS Examination reports Leif owes a total of $686K of tax plus penalty. It takes IRS another nine months to send Leif a SNOD, from which Leif petitions, claiming he never got credit for the money he already paid as restitution. But Leif never filed Form 4089-B, Notice of Deficiency–Waiver, for the year at issue.

And petitioning the SNOD holds up assessment until Tax Court decides whether or not to uphold the deficiency as determined by Exam.

“The parties agree that there is a deficiency of $392,083 and a section 6663 penalty of $294,062 for tax year….  The parties, however, disagree about the treatment and characterization of petitioner’s restitution payments.  This dispute boils down to an issue of timing.  Petitioner requests that we treat the restitution payments as payment in satisfaction of his deficiency and section 6663 penalty for tax year….  Respondent, however, is statutorily prohibited from crediting petitioner’s account until the deficiency and the section 6663 penalty are assessed.  See secs. 6201(a)(4), 6213(a), (b)(5); see also Schwartz v. Commissioner, T.C. Memo. 2016-144.” 2017 T. C. Memo. 52, at p. 5.

Tax Court’s jurisdiction to review a deficiency depends upon there being a deficiency. Section 6211(a) defines a deficiency as the difference between tax actually due, minus tax shown on return, minus prior deficiency assessments (or collections if no assessment), plus rebates.

Restitution orders are estimates of damages to the fisc, but aren’t assessments. It’s a classic YMMV (your mileage may vary).

The restitution wasn’t shown on Leif’s original return, there were no prior deficiency assessments or rebates, and IRS can’t assess the amount of the deficiency even though both IRS and Leif agree how much that is, and Leif’s restitution covers it.

“By failing to waive restrictions on assessment and filing a petition in this Court, petitioner has effectively prevented respondent from doing exactly what he is requesting respondent to do–reduce the amount due by amounts remitted before petitioner received the notice.  See sec. 6213(a).  After the amount of petitioner’s restitution order was summarily assessed, respondent determined an income tax deficiency for petitioner’s tax year….  Upon making that determination, respondent was statutorily obligated to send petitioner a notice of deficiency before assessing the deficiency and the section 6663 penalty.  See sec. 6212(a).  Respondent has stipulated that following entry of a final decision in this proceeding, he will assess the income tax deficiency…, the penalty pursuant to section 6663…, and interest as provided by law for tax year….  And respondent will credit petitioner’s account with the restitution payments, as of the date of those payments, against those civil tax assessments.” 2017 T. C. Memo. 52, at pp. 11-12.

As for interest in these restitution-assessment jumpballs, see my blogpost “Als Ob,” 11/22/16.

I don’t fault Leif’s attorney for shooting in a petition. Given the Draconian 90-day cutoff, I submit one has no choice.  As for not filing the 4089-B, it’s easy to play Monday morning quarterback. So I’ll let it go at that.