In Uncategorized on 12/15/2014 at 17:41

At least it would seem so for Leroy Muncy, 2014 T. C. Memo. 251, filed 12/15/14.

Leroy’s troubles start when he plays protester dodges, with fake contractor status while in truth and in fact an employee. The forces of righteousness catch up, and Leroy cops to one count of Section 7201 knowingly and willfully et cetera. As part of his criminal plea in aid of avoiding the slammer, Leroy agrees to heavy-duty restitution, which the record does not show he paid.

The plea agreement says it binds only Leroy and the US Attorney for the Eastern District of AR, and Leroy’s a free fire zone for everyone else. The plea agreement calls the restitution “criminal monetary penalties”, but later an order calls it restitution.

IRS hits Leroy with a SNOD, deducting the restitution amounts from the deficiency, but changes its mind and amends its answer to Leroy’s petition to add back in the restitution numbers.

Amidst a flurry of protester stalling, Leroy calls “foul”, raising the plea agreement as a bar to increasing the deficiency set forth in the SNOD.

“Although the District Court ordered specific restitution amounts for each of the tax years … petitioner’s tax liabilities for each of these years were not an essential element of the Government’s case and were not actually litigated.” 2014 T. C. Memo. 251, at p.9 (Citations omitted).

So while an essential element of Section 7201 criminality is an underpayment, a finding of the exact amount is not.

Judge Nega goes into parallel statutes and the legislative history of Section 6201(a)(4) to show that restitution can be collected without using the deficiency procedure. So the restitution order neither determined Leroy’s tax liability nor offset the deficiency shown.

Leroy’s double jeopardy argument also fails. “Petitioner also contends in his petition that the Double Jeopardy Clause of the Fifth Amendment of the U.S. Constitution bars the Commissioner from imposing civil fraud penalties and additions to tax in the notice of deficiency. We note that the double jeopardy clause ‘protects only against the imposition of multiple criminal punishments for the same offense.’ Hudson v. United States, 522 U.S. 93, 99 (1997) (emphasis added). Furthermore, the civil tax penalty for fraud is not a punishment for purposes of the Double Jeopardy Clause of the Fifth Amendment. Helvering v. Mitchell, 303 U.S. at 398; Morse v. Commissioner, T.C. Memo. 2003-332, aff’d, 419 F.3d 829 (8th Cir. 2005); Roberts v. Commissioner, T.C. Memo. 1997-216.” 2014 T. C. Memo. 251, at p. 18, footnote 9.

IRS wants nonpayment of estimated tax (Leroy filed nothing, of course), but Year One of the sequence is rejected because IRS didn’t show Leroy owed any money for the year preceding Year One, so the 90%-100% tests don’t work for Year One, but they do for every succeeding year.

And pleading guilty to Section 7201 delictions is a pretty big badge of fraud.

Leroy does catch one break: the Section 6673 penalty does not fall upon him.

But watch it: “In this case the Court will not grant sanctions. This is not because the facts and law do not support the sanctions. Rather, the Court chooses to give petitioner a warning before imposing sanctions. While the record supports such sanctions, the Court is circumspect about imposing them without a proper warning to parties. Now that such a warning has been issued, the Court expects that petitioner will not continue to make frivolous arguments in this or other Tax Court proceedings or relitigate a settled case.” 2014 T. C. Memo. 251, at p. 25.

Stand by for the petition when IRS liens and levies.

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