In Uncategorized on 03/09/2012 at 17:36

No decisions out of Tax Court on 3/9/12, so a couple of orders caught my wide unwinking eye.

First is William Craig Soucy, Docket No. 596-12. It’s a short tale, told by Judge Colvin, thus: “On March 6, 2012, respondent filed a Motion To Dismiss for Lack of Jurisdiction on the ground the notice of deficiency was issued after the expiration of the period for assessment and collection provided under I.R.C. section 6501(a). Respondent states in the motion to dismiss that petitioner does not object to the granting of the motion.

“It is well settled that an allegation concerning the expiration of the period of assessment and collection is an affirmative defense and not a plea to the jurisdiction of this Court. Badger Materials, Inc. v. Commissioner, 40 T.C. 1061 (1963); see also Robinson v. Commissioner, 57 T.C. 735 (1972).” Order, at p. 1.

No reason why petitioner should object, the SOL has run and IRS is literally Sans Soucy (sorry, guys). But SOL, as Judge Colvin points out, is an affirmative defense. It has to be pled and proven. So he tells IRS and Sans to file a status report, or better still, submit decision documents.

Next is Albert Bront and Victoria Y. Pavlenko, Docket No. 16198-10S. Al was an IRS Grade 14 Revenue Agent gone to the Dark Side. DOJ claimed he filed false tax returns, helped others to do so, and capped off his career by threatening to assault and murder a Federal law enforcement agent officer in violation of 18 U.S.C. section 115(a)(1)(B). Al pled guilty to a count of Section 7206(1) violation, and two counts of Section 7206(2) violations, all of which were either filing false returns himself, or assisting others in that nefarious practice.

Judge Wherry takes up the story at page 3 of the Order: “…Mr. Bront appeared with his criminal counsel in front of the Honorable Otis D. Wright and entered his plea of guilty to counts 4, 10, and 13 of the first Superceding Indictment [The Section 7206 violations.]. After an extended discussion with Mr. Bront, the court found that the plea was a knowing and voluntary plea supported by an independent basis in fact containing each of the essential elements of the offense and accepted Mr. Bront’s guilty plea.

“… the United States District Court for the Central District of California entered a judgment of guilty as to counts 4, 10, and 13 of the First Superceding  Indictment. Mr. Bront has appealed the judgment insofar as it relates to his sentencing and the computation of tax loss. Mr. Bront has taken no action in the United States District Court or on appeal to withdraw his guilty plea.” Order, at  p.3.

Now Al wants to dispute certain adjustments to his tax return for one year at issue, and incidentally the Section 6663 civil fraud penalty IRS wants to tag him with.

IRS says “collateral estoppel. You pled guilty to fraud, so you can’t try to undo the effects.”

Judge Wherry gives the short course on issue preclusion, a/k/a collateral estoppel: “Statements made by a taxpayer in a prior case, whether written or oral, are judicial admissions and bind the taxpayer in future actions.

“Collateral estoppel precludes a party to a prior suit from relitigating in a later suit issues of fact and law that were actually and necessarily decided by the prior court in reaching judgment in the prior suit. It exists for ‘the dual purpose of protecting litigants from the burden of relitigating an identical issue and of promoting judicial economy by preventing unnecessary or redundant litigation.’ There is no difference between a judgment of conviction based on a guilty plea and one rendered after a trial on the merits.

“For Federal tax litigation, collateral estoppel applies when (1) the issues of law and fact in the second suit are the same as the issues in the first suit; (2) a court of competent jurisdiction has rendered a final judgment; (3) the parties in the second suit are the same or in privity with the parties in the first suit; (4) the issues were actually litigated in the first suit; and (5) the controlling facts and legal principles are unchanged.” Order, at pp. 3-4. (Citations omitted.)

Al claims he’s going to bring a habeas corpus proceeding, and therefore his conviction isn’t final, but he hasn’t done so, and even if he did, the conviction is still a conviction until overturned. Even then, his admissions are admissible in a civil proceeding.

OK, Al is estopped, right? Not quite, says Judge Wherry: “The problem is that Mr. Bront never agreed to the specific factual allegations contained in the First Superceding Indictment regarding his 2006 tax year and the ones respondent argues he should be estopped from contesting. We agree with respondent that ‘a guilty plea is an admission of all the elements of a formal criminal charge.’ But establishing specific tax liabilities is not an element of section 7206(1) and consequently none need to be determined.” Order, at pp. 5-6 (Citations and footnote omitted).

So even though Al hasn’t formally petitioned, he asked in a status report to prove his return was in fact correct, and Judge Wherry will give him a shot.

Even better, Al isn’t estopped to challenge the Section 6663 fraud penalty. He did say in his Plea Agreement: “’[he] is liable for the fraud penalty imposed by the Internal Revenue Code, 26 U.S.C. § 6663, on the understatement of tax liability for tax years 2003, 2004, 2005, 2006, and 2007.’ But Mr. Bront was never found guilty of this by the District Court for the Central District of California nor was this issue fully litigated, and therefore Mr. Bront is not estopped from contesting his liability for the civil fraud penalty of section 6663.” Order, at p. 7 (footnote omitted, but read it, it’s more useful stuff about collateral estoppel).

And though Al’s statements might be construed as judicial admissions, those relate to facts, not law. A defendant’s admissions are not conclusive on a question of law.

Good learning here, even if it doesn’t make the Decisions page.

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