In Uncategorized on 07/24/2016 at 06:38

 Off Again, On Again, Gone Again, Finnegan

I take my subtitle from the 1917 poem that Strickland Gillilan used to introduce same to lovers of verse.

You remember John and Joan Finnegan, induced to fiscal sin by the fraudster Howell. If not, see my blogpost “The Fraudster’s Toolbox,” 6/17/16.

Now my blogpost aforementioned dealt with Howell’s skullduggery, but the Finnegans came unglued over the SOL. The standard three had run. IRS claimed unlimited due to Howell’s fraud; IRS never claimed that the Finnegans were fraudsters.

The Finnegans lost when trial counsel admitted that the return, not the Finnegans, was fraudulent.

Comes now a very well-known law firm, which I shall call The Jersey Boys, and moves to reargue. They kindly sent me their motions papers, which I read.

They rely on a USCFC decision, upheld by USCA Fed Cir. The upholder is BASR Partnership v. USA, No. 2014-5037 (7/29/15), which hadn’t been published when Finnegan was argued back in 2014.

Note again that it took nearly two years after trial for an opinion. Justice delayed is…but you know the rest.

BASR says that fraud, whether for imposition of the 75% chop or keeping SOL alive indefinitely, must be the taxpayer’s fraud, not the preparer’s. In doing so, Fed Cir deftly sidesteps poor old Ray Fouche (as to whose sad story see my blogpost “The Cover-Up – Uncovered,” 4/24/13). But Ray was in 2 Cir.

The Finnegans, being Floridians when they petitioned, are Golsenized to 11 Cir. And 11 Cir. doesn’t seem to have ruled on the issue.

I once again point out how ridiculous it is that the one Federal statute that affects more people, both US citizens and non-citizens, than any other; which moreover is a minefield in the middle of a toxic waste site, where even those highly-educated who have spent their working lives dealing with little else can come disastrously to grief; is most often adumbrated by non-specialists on a purely geographical luck-of-the-draw. There has to be a National Tax Circuit Court of Appeals, and the bench has to be comprised of specialists.

Back to business. You can read BASR for yourselves, and the taxpayers (a Jenkens-and-Gilchrest client; I’ll say no more) are sympathetic. As, I’m sure, are the Finnegans.

But the Fed Cir majority seems to think that taxpayers employ preparers only for complex returns. The statistics are overwhelmingly the other way. The tax prep industry is huge, and largely unregulated; Doug Shulman’s abortive efforts went down in well-publicized flames. And apparently Congress doesn’t feel moved to do anything. Wherefore in the Wild West atmosphere of tax prep, where the key to success is “I’ll get ya a big refund” and where the first casualty is the usual, no one should be surprised that there’s a big premium on fast-and-loose. And the revenue losses have to be enormous.

So without wishing to rain on the Finnegans’ parade, I quote the dissent in BASR, from Ch J Prost: “The majority removes a key tool from the IRS’s toolbox for policing the submission of fraudulent tax returns. Nearly all taxpayers with significant sums at issue employ a tax preparer. Often, the IRS uncovers fraudulent returns by discovering the tax professionals who perpetrate fraud. It is not an easy matter to discover fraud, fully investigate it, and determine the proper tax liability within three years. See id. It is even more difficult to prove that a taxpayer knew of a tax professional’s fraud and acted with intent to evade tax. Nonetheless, the majority ties the IRS’s hands behind its back—without impossibly speedy sleuthing or smoking gun evidence, the IRS cannot collect taxes owed and the perpetrators make away scot free.”

The taxpayer chose the fraudster. The rest of us taxpayers didn’t.




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