In Uncategorized on 12/01/2014 at 16:17

No, not the 1968 Dick Francis Edgar-winning mystery, rather this is the story of how a criminal forfeiture of retirement accounts mutates into taxable income plus a bunch of chops–or does it?

That Obliging Jurist Judge Gustafson gives IRS a second chance to brief the issues in a designated hitter, James Leevann Howard, Docket No. 17939-12, filed 12/1/14.

Judge Gustafson ordered post-trial briefs, and asked IRS to address specifically “…why the forfeiture of petitioner’s retirement accounts should be taxable in the same manner as property seized to satisfy a distinct liability. Particularly, we asked how petitioner could be enriched (such that the forfeited retirement accounts should be taxable) when the forfeited retirement accounts did not satisfy a preexisting liability. We observed that, in a typical seizure case, the taxpayer’s assets are seized by the government to satisfy a pre-existing liability. But it seems that in the case of a criminal forfeiture, a criminal defendant may not have a pre-existing liability, and arguably the forfeiture does not yield any accession to wealth because it involves no satisfaction of such a liability. Rather, the defendant simply forfeits to the Government whatever property he has, of whatever value.” Order, at p. 1.

Apparently IRS also wants failure to file, failure to pay tax shown, and failure to pay estimated tax chops from James Leevann, notwithstanding that the Federales have plundered him of his last centime.

IRS has some “‘splainin’ to do”, but inasmuch as Judge Gustafson gave everybody a tight briefing deadline, he allows IRS time to explain how James Leevann could have known at the beginning of the year that he would have estimated tax due when he forfeited his retirement accounts at the end of the year.

And IRS can explain how a criminal forfeiture enriched James Leevan by finding a case that deals with something beside the Section 72(t) early withdrawal penalty, apparently not an issue here.

As to the Section 6651 chops, IRS can explain “…respondent’s view on whether petitioner’s incarceration and forfeiture of all his real and personal property satisfies the reasonable cause exception for section 6651(a)(2).” Order, at p. 2

And just so IRS’s counsel doesn’t feel neglected, counsel can also “…discuss (a) whether he considered waiver of the section 6654(a) addition to tax because this was arguably an unusual circumstance (as described in section 6654(e)(3)(A)) in which the imposition of the tax might be against equity and good conscience, and, if so, (b) whether this Court has jurisdiction to review respondent’s decision, either de novo or for abuse of discretion.” Order, at p. 3.

IRS counsel, you have until December 20 to answer all of Judge Gustafson’s questions.

Footnote to the foregoing–IRS folded. See Order, 2/5/15.

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