In Uncategorized on 11/15/2017 at 15:51

Didn’t Commit Fraud

Judge Goeke’s off-the-bencher gives IRS partial summary J on all the income and expense deductions on the FPAA, but not the fraud chop, in Solutus, LLC, Ozark Pure Trust, Robin Standifird, Trustee, Tax Matters Partner, Docket No. 29600-13, filed 11/15/17.

Robin is brother of Lance C., who is quite a card. “He attempted the assignment of his income from earnings as a salesman to avoid payment of income tax. LCS has a history of aggressive tax evasion and has been previously labeled by this Court as ‘a frequent litigator of groundless challenges to the validity of the Internal Revenue Code.” Standifird v. Commissioner, T.C. Memo. 2002-245.” Order, Transcript at p. 4. Rounder First Class is Lance C.

But Lance C. is creative; by interposing the LLC, he brings TEFRA into play. Notwithstanding that his income assignment dodge is an old nonstarter, once a 1065 is filed, all the TEFRA panoply goes into play, even if the partnership is a total phony.

“As a protective measure, the IRS issued a notice of deficiency to LCS as an individual. He moved to dismiss that matter for lack of jurisdiction because of the TEFRA rules which required that the assignment of income be resolved at the partnership level. Respondent agreed with that position and explained that the regime for dealing with TEFRA entities required that the case be dismissed even if the Court determined that the Solutus entity was not a valid tax partnership.”Order, Transcript, at p. 5.

Check out Section 6221, Section 6223, 6233 and Reg. 301.6233-1(b).

And this is true even though Lance C. is not a partner of Solutus, and this song-and-dance is strictly his own dodge. Bro Robin bails on the eve of trial, after putting in some “specious” papers. See Order, Transcript, at p. 13.

So everything is determined at partnership level, and of course everything gets blown away. Lance C.’s 3SOL argument craters because 6SOL applies to bogus partnership returns.


IRS wants Section 6663(a) fraud chops against Lance C. and his enablers.

“Clearly, Section 6663 involves an analysis of intent and the intent to file a return which understates tax. In the present case, the record is clear that LCS did not file personal income tax returns. And it is well known that partnership returns do not actually state a tax liability.

“While we are cognizant of the fact that cases have upheld the application of the Section 6662 penalty regime in the context of TEFRA proceedings, the parties, specifically Respondent, candidly points out that there have been no cases of record that actually have applied the fraud penalty in the context of TEFRA proceedings.” Order, Transcript, at pp. 13-14.

Lance C. signed nothing, neither a Form 1040 nor a Form 1065; he probably didn’t even sign the check for lunch. So no fraud there.

The Section 6662(c) negligence chop is definitely on the cards, as Bro Robin made no attempt to comply with anything.

“There was clearly a disregard of the provisions of the Internal Revenue Code on the behalf of LCS and his brother Robin in submitting partnership returns for an entity that was assigned personal income and claiming expenses which were clearly not business-related expenses because the expenses related to personal use of the funds assigned to Solutus. The record in this partnership case makes very clear that those are the facts that exist that support the application of Section 6662(c).” Order, Transcript, at p. 15.

But no 75% fraud chop. At least not here, but IRS’ motion for summary J on the fraud chops is denied without prejudice. Stay tuned.

I’m sure IRS will agree with my blogpost “I Won’t Mourn TEFRA,” 1/5/17.


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