In Uncategorized on 06/14/2021 at 15:53

Successors to the late Ron H. Bell’s interest in Bell Capital Management, Inc., 2021 T. C. Memo. 74, filed 6/14/21, the corporation the late Bell founded and 100% of whose shares he owned, find the corp facing unpaid FICA/FUTA plus fraud chops, as a result of the late Bell’s offshore employee leasing games.

These dodges involved an onshore highroller with a one-man-band operation causing his wholly-owned to rent him from an offshore dummy. The wholly-owned supposedly avoids payroll taxes, which the offshore dummy surreptitiously funnels back to the highroller.

The late Bell came unglued before my blogging days back in 2009 in Foxworthy, Inc., 2009 T. C. Memo. 203, and affirmed by 11 Cir. in 2012. IRS claims collateral estoppel (issue preclusion). Judge Wells unwraps the factors and finds for IRS.

The corp’s claim that the late Bell’s guilty knowledge cannot be imputed to it because there was another corporate officer besides the last Bell collapses, as it came out in Foxworthy that the other officer would sign whatever the late Bell put in front of him.

“We find that for each period in issue, petitioner’s withholding form and Forms 941 and 940 were false or fraudulent returns because its officers intentionally omitted payments made for Mr. Bell’s benefit with the specific purpose to evade tax believed to be owing. Petitioner properly reported Mr. Bell’s wages before 1996. For the periods in issue, petitioner’s officers entered into leasing contracts which were part of an overall scheme of offshore transactions. Mr. Bell’s already established fraud as to those offshore transactions is evidence we can consider in finding petitioner’s fraudulent intent. Mr. Bell acted in his capacity as petitioner’s officer when he designed and implemented the OEL transaction with Mr. R. Mr. C, another individual acting in his capacity as an officer, assisted by signing petitioner’s lease agreements. We find that as a result of the scheme to understate Mr. Bell’s Federal income, petitioner evaded its employment tax obligations. Whether this was by design or implementation is irrelevant. Any employment tax fraud was part and parcel of an overall intent to defraud the Government. Petitioner had to avoid the employment taxes due respondent for either it or Mr. Bell to evade responsibility. The reporting of one would almost certainly have led respondent to challenge the omission of the other.” 2021 T. C. 74, at pp. 15-16. (Names and citations omitted).

As for challenging IRS’ proof, the successors are playing the Michael Corleone gambit.

And Judge Wells isn’t buying the Eighth Amendment excessive fines argument about the Section 6663 fraud chop. Gotta protect the fisc, y’know.


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