Attorney-at-Law

TRIAL PREP

In Uncategorized on 09/12/2022 at 15:50

Lakeisha Degourville, T. C. Memo. 2022-93, filed 9/12/22 shows the need for good trial preparation. Yes, Lakeisha’s was less than sterling, although the GA authorities had seized her records. But IRS’ wasn’t of the finest, either.

Lakeisha ran her own tax prep business and a hair salon. The tax prep “… was recognized as one of the largest tax return preparation companies in Columbus, GA, had continuous operations from 2009 until 2014, and employed approximately 18 persons on average.” T. C. Memo. 2022-93, at p. 2.

Unhappily, Lakeisha went down for State income tax evasion. IRS hit her for $439K of unreported income, plus a Section 6663 fraud chop. Judge Wells has the story; it’s the usual dealings in cash, claiming false filing status (HOH vs MFS), and lack of recordkeeping. While Lakeisha claims the GA authorities have all her records, she never asks for them before trial nor has kept back-ups. Hint: if your records are subpoenaed, copy them. If seized, demand they be produced if you need them for trial.

What I want to focus on is the Section 32(k)(1)(B)(i) 10-year lockout for EITC. Lakeisha and spouse both claimed EITC and claimed separate residences. IRS claims this was fraudulent, and wants Judge Wells’ “approval” to impose the lockout. But IRS asks for this in an Amendment to Answer, as the “approval” was never mentioned in the SNOD. Hence IRS has Rule 142(a)(1) BoP, as this is new matter requiring different proof.

Using belt-suspender-and-crazy-glue, IRS wants the 2-year Section 32(k)(1)(B)(ii) lockout if somehow Lakeisha avoids the fraud chop, T. C. Memo. 2022-93, at p. 17, footnote 6. But iRS does this in its Simultaneous Opening Brief, again earning BoP.

The result is a schemozzle at the trial.

“Respondent contends in the Amendment to Answer that petitioner improperly claimed the EITC in ‘various preceding tax years’ but neither alleges nor offers proof of a prior determination of fraud. Respondent does not identify nor allege the ‘most recent taxable year’ for which there was a final determination that petitioner’s claim to the EITC was due to fraud. Respondent does not clarify his view of the role played by the state conviction or any unidentified prior determinations by this Court. It follows that respondent has provided insufficient pleadings and supporting facts to permit the Court to determine compliance with section 32(k)(1) under a plain and ordinary reading of the statute.” T. C. Memo. 2022-93, at p. 17.

The 2-year lockout craters for the same reason.

Hint: If you have a bright idea that you never pled before, know what you have to prove and be ready to prove it.

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