In Uncategorized on 05/22/2013 at 23:43

Islands, That Is

The last chapter of a Section 932 saga, the unguided Congressional largesse to our bankrupt islands in the sun, brings to a close the unbroken string of IRS losses to Artie Appleton and his legal beagles, in Arthur I. Appleton, Jr., Petitioner, and The Government of The United States Virgin Islands, Intervenor, 140 T. C. 14, filed 5/22/13, Judge Jacobs bringing down the curtain, with twenty-one (count ‘em, 21) lawyers in on the play.

To review, see my blogposts “Statute of Limitations? Maybe Not”, 12/28/10, “Missed It, But Better Late Than Never”, 8/24/11, and finally “Somebody Does Read This Blog”, 12/4/11.

Briefly, Artie fled the North American mainland, settled in the aforesaid impoverished paradise, and got into an employee lease deal whereby he avoided payment of a bushelbasket of income tax. Of course, he sedulously and meticulously filed with Virgin Islands Internal Revenue Service (VIBIR), as directed by the instructions to Form 1040. And if that was his sole obligation, the three-year SOL had long run.

But IRS claimed that, as Artie never filed with them, the SOL was wide open and Artie owed the aforesaid bushelbasket plus interest, additions and penalties.

The VI guvmint leaped into the fray, was denied by Tax Court but let back in by Third Circuit (where VI appeals lie). “Counsel for intervenor stated that the Virgin Islands is involved in this matter because ‘we want the jobs’ and “the IRS’s position is a job killer’.” 40 T. C. 14, at p. 14, footnote 13 cont’d.

IRS’ feeble arguments get longer shrift than they deserve (but 21 lawyers have to bill for something, y’know).

Artie’s returns weren’t returns. Forget it; they were 1040s filed with VIBIR, like the instructions for said forms stated.

Artie should have filed with Bensalem PA as a foreigner, showing zero income and deductions. Nope, not for the years at issue. The Form 1040 instructions for those years said no such thing. And Artie was no foreigner; he was a resident of the VI, and IRS so stipulated.

Artie should have filed with IRS and with VIBIR. No, only if he was a corporation, and he wasn’t.

IRS issued a Notice that would have required Artie to file with IRS, after the years at issue, claiming it was retroactive. “Retroactive notices published by the IRS do not have the force and effect of law, nor are they regulatory. At best these notices can be considered as the IRS’ litigating position.” 140 T. C. 14, at p. 29. (Citations omitted).

So IRS has another bad day (and they have had many lately). And Artie sails off into the sunset, clutching summary judgment in his favor. How many jobs he and his fellow gamesters created for the VI guvmint is nowhere stated.

But this blogger got a lot of mileage out of this saga.

  1. Did he have income? Was it reported to the VIBIR? And was the income, if any, underreported leaving a 7 year SOL?

    The above report is sketchy. And link isn’t working.


    • Link is working. Yes, he had income. Yes, he reported it to VIBIR on Forms 1040 for the years at issue. As for underreporting and the 7-yr SOL, that’s for VIBIR to deal with, and they seem to have accepted his returns as-filed.


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