Attorney-at-Law

Archive for March, 2015|Monthly archive page

NAME IT AND CLAIM IT

In Uncategorized on 03/03/2015 at 16:45

No, not the NBC giveway show from the 1950s, neither is this about the pop-culture name for certain religious beliefs. No, this is the story of Ruth A. Lobs, 2015 T. C. Sum. Op. 17, filed 3/3/15, as told by The Judge With A Heart, STJ Armen.

Ruth and former spouse had savings bonds that they split when they split. Former spouse bought them, but titled them “either-or”, a not uncommon (and permissible) approach. See 31CFR§353.7.

When they split, Ruth and former wanted her share to go to son Joe. But Ruth never retitled the bonds.

In the year at issue, son Joe needed money, as is often the case with children, even grown children like son Joe. So Ruth headed over to the credit union, cashed in the bonds, and had the cashier draw a check for net proceeds directly to son Joe.

The record doesn’t reflect whether son Joe paid income tax on the accrued interest, but Ruth sure didn’t, and that’s why she’s in Tax Court.

Ruth testifies she and former always treated the bonds she had as “Joe’s bonds.” She intended him to have them, but never got around to changing the names on the bonds.

“Registration of series EE U. S. savings bonds is generally conclusive of actual ownership of, and interest in, such bonds. 31 C. F. R. sec. 353(a)(2010). Generally, saving bonds are not transferable and are payable only to the owner(s) named on the bonds. Id. sec. 353.15; see id. sec. 353.35(a). Savings bonds registered in coownership form will be paid to either coowner upon request of either coowner and surrender of the bonds. Id. sec. 353.37; see id. 353.39.” 2015 T. C. Sum. Op. 17, at p. 6 (Footnote omitted).

Ruth claims the bonds really were Joe’s, and should have been so registered.

Mox nix, says STJ Armen.

“The fact that the…bonds could have been registered in some other manner is of no moment. As the U. S. Supreme Court instructs, we give effect to what actually happened and not what might have happened.” 2015 T. C. Sum. Op. 17, at p. 7 (Emphasis by the Court; citations omitted).

Ruth’s name was on the bonds, she told the cashier how to make out the check, and so it was as if Ruth got the money and gifted it to son Joe.

Takeaway- Get those bonds out of the shoebox under the bed, go to the Treasury website, and get them titled right.

1099-C – A NON-REVIVER

In Uncategorized on 03/02/2015 at 22:55

There was a recent debate on a message board I follow about whether, when stiffed by a client, an attorney can file Form 1099-C on the deadbeat.

The proponent of the tactic was strongly rebuked, as 1099-Cs are to be filed only by governments and applicable financial entities. See Section 6050P and the regs.

But IRS can file them, and does. One result is that they get shot down, as shown in my blogpost “Sunk By The Navy?”, 9/28/11.

And today we have another example in a small-claimer, Suzanne Moore Bacon, 2015 T. C. Sum. Op. 15, filed 3/2/15, from The Judge With A Heart, STJ Armen.

Suzanne is no angel; she claimed FEMA money from the Northridge CA earthquake for what she said was her primary residence, except FEMA later claimed it wasn’t and sent Sue dunning letters for two years. Sue did nothing, of course, so FEMA bucked Sue’s file to DOJ so they could sue Sue for the $3450 of unguided largesse, with a billet doux stating the date when the SOL ran.

You can imagine what DOJ did. And Sue did the same.

The 28USC§2415 six-year SOL clock had long since run down while DOJ was doing other stuff. Nothing daunted, IRS dropped a 1099-C on Sue for the $3450 plus interest (which she ignored), asserting that sending the 1099-C was the “identifiable event” that Section 6050P requires to establish uncollectibility and therefore cancellation of debt.

Nope, says STJ Armen. “The Court recognizes that, in general, the expiration of a period of limitations on collection of indebtedness does not extinguish an underlying debt obligation but simply provides an affirmative defense for the debtor in an action by the creditor. Miller Trust v. Commissioner, 76 T.C. 191, 195 (1981). This is confirmed by section 1.6050P-1(b)(2)(ii), Income Tax Regs. However, the instant case deals with the second clause of the subdivision, ‘expiration of a statutory period for filing a claim’. Sec. 1.6050P-1(b)(2)(i)(C), Income Tax Regs. That clause is not so limited.”

So, even though the theoretical right remains (without a legal remedy), the end of the remediation period extinguishes the debt for tax purposes.

And the SOL ran six years before IRS dropped the 1099-C on Sue. So no cancellation of debt in that year, and no deficiency.


HE WUZ ROBBED – AND HOW!

In Uncategorized on 03/02/2015 at 15:15

But Judge Cohen Makes the Tackle

That’s Judge Mary Ann Cohen, playing the position of Antrel R. Rolle, himself a safety for the Arizona Cardinals, in Docket No. 13779-10, filed 3/2/15. Antrel didn’t play it safe with his income taxes, but Judge Cohen makes the tackle.

Antrel misplaced his trust in Hiram Martin, Esq. Hiram had filed bogus returns in Antrel’s name, provided bogus addresses for Antrel (so all communications would go to Hiram), grabbed refunds, made “…various motions attempting to seal the record, preclude discovery, and dismiss the case.” Order, at p. 1.

These weird goings-on caused Judge Cohen to order copies of her orders denying Hiram’s antics to be sent to Antrel as well, but the phony addresses supplied by Hiram made sure Antrel never got them.

Among the orders Judge Cohen issued was one that sustained seven-figure deficiencies (plus interest and penalties) against Antrel. Hiram stipulated to entry of decision, and the whole caboodle descended upon Antrel.

Bill Barrett over at Forbes had a take on the case back on 1/26/10, when Hiram first petitioned the deficiencies. I expect Peter Reilly, CPA, a Forbes blogger, will pick up the sequel.

Here it is: “A Stipulation of Facts was filed, and petitioner, Armelia Rolle, William Charles Bennett, and Cubby Williams testified. The testimony of those witnesses was credible and uncontradicted and is consistent with the stipulated documents. The testimony and documents are consistent with petitioner’s contention that his former counsel, Hiram Martin, filed false tax returns in petitioner’s name without petitioner’s knowledge, converted refunds claimed on those returns, and concealed events occurring subsequent to the filing of those returns. Specifically, it appears that Martin concealed and misrepresented the status of his communications with the Internal Revenue Service, forged petitioner’s signature on the petition that commenced this case, and took steps intended to and having the effect of concealing the existence of this case from petitioner. That concealment was accomplished, in part, by misrepresentations to Armelia Rolle, who was handling tax matters for petitioner, and by using various addresses of Martin as an address for petitioner, so that communications concerning events involving petitioner’s tax liability would be sent to Martin and not sent to petitioner or to Armelia Rolle.” Order, at pp. 1-2.

So Judge Cohen is convinced that Hiram is a thoroughly bad dude, but can she vacate her decision belatedly?

“Fraud on the court sufficient to vacate a decision otherwise final has been described in various ways, and no single definition covers all situations. Relief on that ground, however, has been given in cases involving forged documents and prevention of a party’s presentation of a defense. Although the frauds apparently committed here were first on the Commissioner and on petitioner, fraud was carried into this Court when the petition was filed, Martin stipulated to deficiencies that could have been contested, and the decision was entered based on that stipulation.

“In considering whether a decision should be vacated, the Court also considers whether a different decision would have resulted in the absence of fraud, i.e., whether the fraud was material. The correct determination of petitioner’s liability cannot be made at this time because there was never a trial, and respondent has declined to work with petitioner because of the existence of the decision in this case. Petitioner has presented authority that suggests that a correct determination would include whether petitioner is entitled to credit for the wrongful refunds received by Martin. In any event, and at a minimum, if the Court had been aware of the facts now in the record at the time the stipulation for decision was received, the Court would have inquired into the obvious conflict of interest between Martin and petitioner and would have taken additional steps to be sure that petitioner was aware of the status of this case. See Rules 24(g) and 201, Tax Court Rules of Practice and Procedure. Thus there was fraud on the Court, and the fraud affected the decision entered.” Order, at pp. 2-3. (Citations omitted).

So the decision is vacated, IRS and Antrel now should work together to figure out Antrel’s taxes and the consequences of Hiram’s defalcations, and file status reports.