I sometimes think that creativity is an overrated talent. Case in point: King Solarman, Inc., 2019 T. C. Memo. 103, filed 8/19/19. King is the business of Cung, Taiwanese immigrant, who starts a successful business selling those carts with the giraffe solar panels, that tell us of lane changes and closed exit ramps.

Cung, no accountant, has an inventive CPA who tries to hide $5 million of income via a promissory note. The note was given by Cung’s customer. The CPA claimed that Cung’s business didn’t have inventory, because there were no carts on the lot at year’s end, and therefore Cung could use cash method, although he’d always filed accrual and never asked for a change. Loser, because it’s whether the income-producing stuff could be inventory, and of course it could.

I’ll spare you Judge Lauber’s extensive trek through the facts, demolishing Cung’s team’s arguments.

The key is that Cung dodges a substantial chop.

“Although Mr. Cung has a college degree, he had no knowledge regarding tax law, and English is his second language.  He retained a CPA to prepare [King Solarman]’s return for each year of its existence.  The accounting issues we have addressed present technical questions of the sort a reasonable businessperson would refer to his accountant, to whom Mr. Cung made full disclosure of all relevant facts.

“Petitioner’s CPA did a less-than-masterful job in preparing KSI’s returns, but we are convinced that Mr. Cung did not know, and had no reason to know, of any deficiencies in that respect.  We do not fault Mr. Cung for not questioning his accountant when he was aware of no reason for doing so.” 2019 T. C. Memo. 103, at p. 37.

True, Cung’s legal team didn’t call the CPA to testify, and that “cuts somewhat in respondent’s favor.” 2019 T. C. memo. 103, at p. 37. But I don’t know I would have called the CPA either; that individual had done quite enough.