In Uncategorized on 06/13/2019 at 16:43

Philip N. Rose and Leanna Rose, 2019 T. C. 73, filed 6/13/19, didn’t have such a little tin box as was so melodically apostrophized in 1959 by Sheldon Harnick and Jerry Bock. Rather, they had a safe with around $56K in it.

“Petitioners kept approximately $56,000 in cash from two large tax refunds in a home safe to conceal it from creditors.  Petitioners did not keep specific records of how much money they kept in their safe, but the tax refunds and Christmas gift checks accounted for most of the cash they had.  Petitioners had several bank accounts during the years in issue and transferred funds among those accounts at various times.  The record does not include bank deposit records for any year before…the first year before the Court.” 2019 T. C. Memo. 73, at p. 10.

Their problems are the not uncommon ones – unreported income and dubious real estate records. Phil and Leanna make out slightly better with Judge Pugh than with IRS’ examiners, but they fall down on the records.

“While we generally accept petitioners’ explanation that they were moving money around between their accounts and their safe, especially where they memorialized the transfers by writing checks, they did not convince us that these transfers took place in these amounts.  We question their ability to recall so many transactions so many years ago without contemporaneous documentation; and we question whether their default explanation of money transfers between their accounts and their safe can explain all of the deposits at issue.  Petitioners’ credibility is diminished by their reflexive tendency to claim that all of the deposits lacking another explanation were transfers either from another of their accounts or from their home safe.  Their credibility is further reduced by their occasional inability to choose which explanation applied to a particular deposit, as we explain below.  Without better records, and with the passage of time, their testimony is not enough.” 2019 T. C. Memo. 73, at p. 19.

Of course there were logs for the magic 750 hours, but these left something to be desired.

“The logs themselves are not reliable and therefore are not reasonable means of establishing real estate service hours. Nor are we persuaded by petitioners’ repeated concessions on brief to eliminate defects identified by respondent.  This is not a negotiation but rather an examination of the record to determine whether petitioners’ logs and other evidence are reliable.  Rather than improving their reliability, these repeated concessions highlight the logs’ inherent unreliability.” 2019 T. C. Memo. 73, at p. 29.

Takeaway: Negotiate before, not during, trial.

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