In Uncategorized on 05/30/2017 at 16:50

Twice Told

Let’s begin with Henry Langer and Patricia Langer, 2017 T. C. Memo. 92, filed 5/30/17. Henry was a two-time loser in Tax Court with personal deductions imperfectly disguised as business expenses. This time around, Henry got nailed yet again for taking deductions for “expenses for parties, gifts, flowers, vases, and holiday decorations, to name a few.” 2017 T. C. Memo. 92, at p. 3.

Henry’s casual approach to compliance with the law triggered a fraud chop.

Judge Nega sustains the chop.

“Petitioners conceded in full the deficiencies for [the three years at issue], and therefore respondent satisfied his burden of proving an underpayment of tax for each year at issue.  Respondent established that, for each year at issue, petitioners’ underpayment of tax was fraudulent and that they intended to conceal taxable income and prevent the collection of tax by overstating deductions and claiming nondeductible and obvious personal expenditures as business expenses.” 2017 T. C. Memo. 92, at p. 4.

So? Overstated deductions aren’t necessarily fraudulent. Henry hasn’t got a great track record when it comes to compliance, but is that enough?

Well, Harry should know better.

“Mr. Langer’s nearly 30 years of experience as a revenue agent and petitioners’ history before this Court for identical issues are relevant considerations in determining whether they had fraudulent intent.  See Beaver v. Commissioner, 55 T.C. 85, 93-94 (1970) (stating that petitioner’s business experience is a relevant consideration in determining whether he had fraudulent intent).  Petitioners’ repeated concealment of income by overstating deductions exemplifies a pattern of fraudulent behavior, and their explanations are implausible and unpersuasive.  See McGraw v. Commissioner, 384 F.3d 965, 971 (8th Cir. 2004) (‘[A] consistent pattern of sizeable underreporting of income * * * and unsatisfactory explanations for such underreporting also can establish fraud.’), aff’g Butler v. Commissioner, T.C. Memo. 2002-314; Sanchez v. Commissioner, T.C. Memo. 2014-174, at *17 (stating that ‘a pattern of conduct that evidences an intent to mislead’ is one of the ‘badges of fraud’ from which fraudulent intent can be inferred), aff’d, ___ F. App’x ___, 2016 WL 7336626 (9th Cir. Dec. 19, 2016); Bruce Goldberg, Inc. v. Commissioner, T.C. Memo. 1989-582, 58 T.C.M. (CCH) 519, 529 (1989) (‘[F]raud may sometimes be inferred from a pattern of overstating deductions.’). Accordingly, petitioners are liable for the fraud penalties under section 6663 for all years at issue.” 2017 T. C. Memo. 92, at pp. 4-5.

The next sad story needed some digging. The order is simple enough, Genci Gjergjani, Docket No. 15311-16, filed 5/20/17.

And the effect is simple enough. “…petitioner’s counsel, Joe Manuel Gonzalez, having been suspended from practice before this Court, it is ORDERED that Joe Manuel Gonzalez is hereby withdrawn as petitioner’s counsel from this case.” Order, at p. 1.

Except that the suspension order is not to be found on the Tax Court website. I expect the usual press release listing delinquents and defaulters hasn’t yet issued.

So I dug. Joe Manuel got nailed for laundering what were said to be proceeds of a marijuana-growing operation. He got time and a fine from the Federales via a sting, and suspended by the FL Bar.

Up here in NY he’d be disbarred, but that’s by the way.

The sad part is what the Tampa Bay Business Journal reports was Joe Manuel’s fee: $4500.00. Forty-five hundred dollars, at the age of 66, after thirty-plus years of practicing law, to throw it all away. The “clients” claimed to be hiding $250K in illegal cash.

Shaking my head.

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