Hisham N. Ashkouri and Ann C. Draper, 2019 T.C . Memo. 95, filed 7/30/19, have provided me with some blogfodder, but now the party’s over. Hish and Ann didn’t follow Rule 151(c), separately stating and numbering their facts and conclusions of law with citations to the record. That left a lot of issues conceded. And their substantiation was well below par.

Boss Hossery goes by the board, even with an assist from Clay. See my blogpost “As Cold as the Clay,“ 5/17/19.

But Hish’s casual treatment of payment for preparation of a business plan for an abortive property development in Tatarstan (where nobody reads my blog, alas), by having payment sent to his wholly owned C Corp, isn’t fatal, though claimed a dodge by IRS only in an amendment to its answer, thus saddling itself with burden of proof.

“Although petitioners fail to cite any evidence in the record in support of their claim that [C Corp], rather than Mr. Ashkouri, was entitled to the payments in issue, we will accept the claims they make in their opening brief as sufficient to avoid treating them as having conceded the issue.  Instead, we will treat the issue as turning on the resolution of a factual dispute:  whether [C Corp] or Mr. Ashkouri was entitled to the payments made by Mr. S.  Because respondent raised the issue by amendment to his answer, he bears the burden of proof on the determinative factual question.  For the reasons explained below, we conclude that he has not met that burden.” 2019 T. C. Memo. 95, at p. 49. (Name omitted).

Though Hish went back and forth in his trial testimony, the record shows both Hish and his C Corp were working on the business plan.  And the Tatar client didn’t care what tax treatment Hish or his C Corp got. IRS claims C Corp didn’t recognize the payment, but the evidence IRS produces shows that the C Corp did.

“In the face of conflicting evidence concerning the identity of the party entitled to payment for the … business plan, we conclude that respondent has not met his burden of proving that petitioners should have included Mr. S’s payments in their taxable income for [year at issue].  The Court found Mr. Ashkouri to be a credible witness.  When forced to distinguish between his role as proprietor, on the one hand, and his role as officer and sole shareholder of [C Corp], on the other, Mr. Ashkouri testified that {C Corp] prepared the business plan.  Because the preparation of the business plan required design work, Mr. Ashkouri’s claim is consistent with his description of the roles of his proprietorship’s and {C Corp]’s businesses.  To the extent that some of petitioners’ responses to discovery requests conflict with Mr. Ashkouri’s testimony at trial, those inconsistencies may be explained either by faulty recollection- corrected after examination of the relevant documents (and before respondent amended his answer to assert unreported income)–or, again, a certain casualness in distinguishing among the roles Mr. Ashkouri filled in his various, interrelated business ventures.” 2019 T. C. Memo. 95, at pp. 52-53.

State income tax refunds cause Judge James S. (“Big Jim”) Halpern a lengthy detour, but whether AMT deprived Hish and Ann of any tax benefit, thus rendering said refunds taxable income, must abide a Rule 155 beancount.

Neither side covered themselves with glory. The moral is careful preparation. And more careful preparation.