Attorney-at-Law

BUT IF YOU TELL ‘EM, MAYBE IT ISN’T FRAUD

In Uncategorized on 02/26/2019 at 15:49

I’m going back a way here, but when I read Judge Paris’ exoneration of Laura Denise Contreras, 2019 T. C. Memo. 12, filed 2/26/19, when IRS tried to toss her innocent spousery based on fraudulent conveyance of assets from her deadbeat abusive ex-spouse, a distant bell sounded.

I remembered my blogpost “Even If You Tell ‘Em, It’s Fraud,” 10/22/12, wherein Judge L Paige (“Iron Fist”) Marvel fraud-chopped John Allen Hatling, even though John Allen claimed he filed Forms 8275 and 8275-R saying the claim of right deduction he was taking was a phony. At the time, I wondered if John Allen was going to 8 Cir, so we could get appellate learning.  This didn’t happen.

Of course Laura’s facts are different. Her deadbeat abusive ex conveyed his share of two lots in Liberty County, TX, both subject to filed NFTLs, in satisfaction of the judgment she got against him for unpaid child support. On one of them sits the underwater (economically) mobile home wherein Laura cares for her children and tries to live on government assistance and whatever child support deadbeat abusive ex coughs up.

IRS, all heart, tries to knock out Laura’s innocent spousery for the joint returns she signed under duress post-divorce, when both she and ex were represented by the same attorney and she was prevented from speaking to the IRS examiner at the audit. IRS claims the conveyance of deadbeat abusive ex’s interest was fraudulent.

I hope Laura’s pro bono counsel, to whom I’ll give a shoutout hereinbelow, have moved for legals and admins.

Judge Paris: “Respondent contends that Lots 12 and 13 were transferred between petitioner and Mr. Contreras as part of a fraudulent scheme.  Petitioner argues that the assets were transferred pursuant to a court-ordered divorce decree judgment subject to the IRS liens of record and were therefore not part of a fraudulent scheme.

“Section 1.6015-1(d), Income Tax Regs., states that a ‘fraudulent scheme includes a scheme to defraud the Service or another third party”.  The basic badges of fraud include an intent to misrepresent, conceal, or hide information from a party.  See Spies v. United States, 317 U.S. 492, 499 (1943); Recklitis v. Commissioner, 91 T.C. 874, 910 (1988).  This Court has previously found there to be a fraudulent scheme when spouses transferred property with the intent to hide such transfers.  See Chen v. Commissioner, T.C. Memo. 2006-160, 2006 WL 2270402, at *5 (finding that transfers to ‘hide the trail of fraud’ and fraudulent intent precluded relief under section 6015(f)).  Here the transfer was made to satisfy a judicial foreclosure due to Mr. Contreras’ failure to pay petitioner $127,050 as awarded in the divorce decree.  The transfer was made with the assistance and guidance of petitioner’s divorce attorney.  It was recorded publicly in Lincoln County and was subject to public inspection.  The Court finds there was no intent to misrepresent, conceal, or hide this transaction from the IRS.  Rather, the intent of the transfer was to satisfy a court-ordered judgment pursuant to the divorce decree and subject to the IRS liens of record.” 2019 T. C. Memo. 12, at pp. 14-15. (Footnote omitted, but it says the present IRS guidelines for Section 6015(f) equity don’t define “fraudulent scheme.”)

A Taishoff “good job” and shoutout to South TX Law School pro bonos Bruce A. McGovern, Esq., Jeffery A. Gold, Esq., and Heidi A. Weelborg (student).

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