Walter D. Prezioso And Kimberly J. Prezioso, T. C. Memo. 2026-63, filed 7/28/26, provide an illustration of a definition of the term “partnership” I’ve long favored; “a partnership is where two or more people engage in business activities to steal from one another.” It’s Walt’s story; he succeeds to operating control of the business Dad and partner built, turns it around as it’s about to crater, and compensates himself by keeping two sets of books, one to allegedly defraud Dad’s partner and the other to defraud IRS, both of which contained bogus payees and omitted money Walt took. 

Walt claims he needed to disguise his payments for his own expenses to stave off disgruntled employees. “Walter maintained that he disguised his personal expenses because there was ‘a lot of talk, a lot of envy’ among GSP employees, and that, upon seeing GSP’s payment of his personal expenses, they might request a raise.” T. C. Memo. 2026-63, at p. 10.

Judge Cary Douglas (“C-Doug”) Pugh won’t wear it. “Walter asks us to accept that he laboriously recoded hundreds of expenses, often multiple times, to avoid discovery by a few employees. This explanation falls apart with the slightest scrutiny. Walter assigned his personal expenses to a different payee even when [business] incurred business expenses in the same month from the same vendor. When asked how a [business] employee could identify certain expenses as personal when the payee for his personal expenses also was an existing vendor for [business], Walter only offered that he tried to keep his practices consistent.” Ibid., at pp. 10-11.

Taishoff says, I’ve never seen a non-publicly-owned business that let any random employee look at the books. 

Besides his partner launching a shareholders’ derivative against Walt when partner’s son was turned down for a job and managed to get a sneak-peek at the books, Walt pulled the ultimate head-shaker.

“The record demonstrates that the expense arrangement represented more than a genuine attempt at tax minimization. On a credit application for a Ferrari lease, Walter understood his actual income to be far greater than that reported to the IRS; he listed both his ‘Verifiable’ income of $52,950, and his ‘Actual’ income of $275,000.” Ibid., at p. 14.

Section 6663 75% fraud chop for Walt.