In Uncategorized on 09/09/2019 at 17:50

Two-and-a-half years ago I addressed the august Tax Section of the American Bar Association, an exalted assemblage to which I do not belong (probably being too dusky of shoe), when I suggested that choice of trial should have some nexus to parties, witnesses, physical evidence or something.

The ABA Taxers thought any further requirement of filling in forms would further befog the hapless pro ses. Perhaps they were right, but I suggest that it wasn’t only the innocents who were in the trial venue game.

See my blogpost “Same Time, Next Year,” 3/3/17. It featured none other than Al Benavides and Louise A. Benavides, 2019 T.C. Memo. 115, filed 9/9/19, now back for some heavy deficiencies and Section 6663 fraud chops ( the 6663s are only on Al because IRS can’t prove Louise had guilty knowledge). Al and Louise had a boatload of unreported income via constructive dividends from the C Corp, which housed Al’s accounting and tax practice.

It’s the usual game, running money between entities, claiming business expenses when personal expenditures were involved. My older readers may recall the late Leona Helmsley, who played a similar game, albeit on a larger scale. Al also went down on a count of Section 7206(2) false returning in USDCDMT.

Al’s testimony doesn’t help. A sloppy bookkeeping claim from a forty-year CPA earns a Judge Pugh classic: “To suggest that taxpayers who made a living handling the tax and accounting matters of others should escape the fraud penalty because of sloppy bookkeeping–itself a badge of fraud–is risible. The ‘reasonable compensation’ argument advanced by Mr. Benavides is a dog that will not hunt. He did not report the diverted gross receipts on his personal returns as compensation from BCO or pay applicable self-employment taxes. He cannot ignore reality or rewrite history now that he has been caught out. Mr. Benavides’ intentioned steps to lower BCO’s taxable income (as well as his own) are clear and convincing evidence of the requisite fraudulent intent for BCO and Mr. Benavides alike.” 2019 T. C. Memo. 115, at p. 39.

Judge Pugh allows a reopener to show IRS satisfied the Section 6751(b) Boss Hoss requirement.

But it doesn’t matter for Louise. She isn’t getting the fraud chops.

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