Turns out that Joseph Michael Balint, T. C. Memo. 2023-118, filed 9/25/23, was grousing about someone grabbing his IRA and other stuff, as I surmised back in 2019; see my blogpost “Common Sense in Tax Court,” 10/2/19. Likewise turns out that it was his loved-once Jacqueline, to whom Joe gave POA whilst in the FL slammer. Jacqueline proceeded to grab north of $130K therewith, and skedaddle for KY, filing for divorce as she went.

Joe didn’t know that Jacqueline grabbed his gelt and scarpered until he got served with divorce papers while he was still in jail.

Judge Gale recollects the sad tale of Andy Roberts, referred to in the aforementioned blogpost, and lets Joe off the hook for whatever didn’t benefit him. Now this comes up in a CDP, so before y’all yell “prior opportunity to contest,” Joe self-reported the income even though he claimed he never got it, as he was scared that, if he didn’t, the FL authorities would revoke his parole. Hence self-reported. So he gets a chance to contest, and does.

Joe sued for divorce his own self after Jacqueline’s case didn’t result in judgment. FL State court found Joe didn’t owe tax on what Jacqueline took, but no issue preclusion, as IRS wasn’t a party to State court proceeding. And nonmutual preclusion generally only bars a claim defensively. Nonmutual offensive collateral estoppel doesn’t apply against the government.

Joe wasn’t the distributee of Joe’s IRA money per Section 408(d)(1), as Jacqueline took same in breach of her fiduciary duty under the POA.

“… although a taxpayer is generally treated as the recipient of any income received by his or her agent, that rule does not apply ‘where the agent receives and misappropriates funds for his own use, where the principal had no knowledge of such misappropriation, and where the principal received no economic benefit from the misappropriated funds.’” T. C. Memo 2023-118, at p. 12.

True, the POA provided for dispositions of property and giving of gifts, which might otherwise be adverse to principal’s interest, but only for tax, estate, and public assistance planning purposes, to benefit Joe. It wasn’t an open-ended license to grab. Judge Gale has plenty of FL somber reasoning and copious citation of precedent for that. And Joe had made it clear to Jacqueline while he was in jail what he wanted…protection of his assets.

Joe’s off the hook.