In Uncategorized on 05/22/2019 at 17:00

The late Justice Potter Stewart’s immortal phrase echoes from the wordprocessor of His Honor Big Julie, Judge Julian I Jacobs, hereinafter HHBJJJIJ, to toss Constance H. Briley, 2019 T. C. Memo. 55, filed 5/22/19, as Connie seeks innocent spousery.

Connie should have known that two (count ‘em, two) straight years of six-figure losses on the MFJ 1040s she filed with now-ex spouse was dodgy, since now-ex’s construction business was flourishing. Even though HHBJJJIJ can’t find any extravagant living, Connie testifies she was sure that the business was making money for more years than those at issue.

Connie had “…a degree in industrial psychology, [and] was employed as a recruiter and human resources department generalist.” 2019 T. C. Memo. 55, at p. 2. So she had no financial education background.

Still and all, “(W)e believe petitioner had reason to know of the understatement of tax on her and Mr. Briley’s joint Form 1040 for each of the years involved.  Petitioner was college educated.  Even a cursory review of each year’s tax return would have revealed that the return reported a large negative income and caused a reasonably prudent individual in the shoes of petitioner to question the accuracy of the negative income.

“Admittedly, much of the negative income in [years at issue] arises from NOL carryforwards, and petitioner does not have a financial education.  But having a sophisticated financial education is not necessary to understand petitioner’s and Mr. Briley’s joint tax returns.” 2019 T. C. Memo. 55, at p. 15.

I wonder if Connie knew about Section 263’s capitalization requirements, which her now-ex and his aggressive preparer Mr. Shaft, of a well-known national tax prep franchisee, blew past to generate the aforementioned NOL and carryforwards thereof. I’m not so sure as HHBJJJIJ that Connie knew about that; however, it’s a much less close question that she should have asked.

Connie is Golsenized to 4 Cir. Is an appeal worth it?

Anyway, big negatives on a MFJ 1040, when no obvious financial stress, are shady, even if you know nothing about tax, aren’t a great recipe for innocent spousery. You should know it when you see it.

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