California Journal of Tax Litigation, 2012 3rd Quarter

Newsletter of the Tax Procedure and Litigation Committee Taxation Section of the State Bar of California

In This Edition

Chair, Message from the Chair
Michel Stein, Esq.

First Vice-Chair and Secretary, provides the Minutes of the May 25, 2012 Committee Meeting
Jane Becker, Esq.

Provides a Special Announcement, “Center for the Fair Administration of Taxes Established”
Suoo Lee, Esq.

Articles

Editor’s Note

Committee Roster and Past Chairs

Message from the Chair

Greetings to the Tax Procedure and Litigation Committee!

During our last meeting at the IRS Offices in Glendale, we heard wonderful presentations from IRS Senior Counsel Donna Herbert, IRS Appeals Team Manager John Schooler, IRS

Senior Estate and Gift Tax Attorney Kym Taborn, and IRS Appeals Officer Fabio Ambrosio. During the extensive program, we learned much about estate and gift tax examinations, appeals and Tax Court litigation. We again want to thank those members of the IRS staff who made this possible, and for their graciousness in hosting us for the entire day.

Speakers at the September 7th Meeting in San Francisco

The next meeting of the Tax Procedure and Litigation Committee will be Friday, September 7, 2012, in San Francisco at Winston & Strawn (address shown below) from 10:30 a.m. to 3:30 p.m.:

Winston & Strawn LLP
101 California Street, 39th Floor
San Francisco, CA 94111

We plan to host a panel discussion on preparer, promoter and material advisor enforcement.

Specific topics covered will be criminal and civil enforcement action for: Promoting abusive tax shelters; aiding and abetting understatement of tax liability; the tax enforcement system, and various civil and criminal statutes involving return preparers. The speakers will include Joseph Wilson Esq. (moderator), FTB Counsel Michael Cornez, IRS Supervisory Special Agent Greg Robins, and IRS LB&I Revenue Agent Barbara Peterson. It should be a wonderful and unique program. As always, one hour of MCLE credit will be earned by those who attend.

We want to extend a hearty thank you to Bradley Marsh, Esq. and the Winston & Strawn law firm for allowing us to hold our meeting at their offices.

Reservations are necessary and must be received no later than 12:00 noon on September 4, 2012. Please RSVP to Dave Klasing at dave@taxesqcpa.net or Michel Stein at stein@taxlitigator.com. Please be prepared to present ID to security staff upon arrival.

Election of New Officer

This is will my last meeting as Chair, and I would like to thank the standing officers of the Committee for their hard work and dedication. Without them the meetings, programs and Tax Network Newsletters of the past year would not have been so successful. Chair-Elect David Klasing, 1st Vice-Chair and Secretary Jane Becker and 2nd Vice-Chair and Editor Patrick Crawford all did outstanding jobs, and we are fortunate that they will be continuing in new roles next year.

During our upcoming San Francisco meeting, we plan to elect a new officer for 2nd Vice-Chair & Editor. Those interested in this position should let me know in advance, and plan to attend the meeting.

Topics for the 2012 Annual Tax Bar Meeting (November 1-3, 2012 in San Diego)

We hope that everyone is planning to attend the Annual Meeting in San Diego. Our Committee is sponsoring and co-sponsoring many programs at the 2012 Annual Meeting in San Diego, including the following: (1) Strategies and Outcomes for Distressed Companies; (2) Preparing and Trying Tax Court Cases in Superior Court and Tax Court;

(3) Due Diligence in Tax Matters; (4) Resolving Tax Debt in a Struggling Economy; (5) Federal Procedural Roundtable; (6) Overview of the Federal and California Taxpayer Advocate Programs; (7) Penalties: Reasonable Cause and Otherwise and (8) Civil Examination to a Criminal Tax Investigation. Many are working very hard to make this program a success. We hope to see you there.

California Tax Lawyer

If you would like to have a “Quick Point” included in the upcoming issue of the California Tax Lawyer, send me any brief technical updates, procedural updates, observations on practice or policy matters, and commentaries you may want to include.

Tax Network Newsletter

We continue to solicit articles for upcoming editions of our Tax Network Newsletter. Please contact Patrick Crawford at patrick@crawfordtaxlaw.com if you would like more information about submitting articles for our next edition. The Newsletter continues to include wonderful information relevant to our members.

Bring Your Camera to The Quarterly Committee Meetings

The editors of the California Tax Lawyer would like to include pictures of our activities. Please send me via e-mail any JPEGS you may have from our meetings, and be sure to identify each person in the photo and the event at which the photo was taken.

Hot Topics

Thanks to all those who have helped make Committee meetings successful and fun. Please come armed with “Hot Topics” for our upcoming meeting. Our members continue to lead, teach and provide insight in our field, so there is much to share.

I hope to see you in San Francisco!

Michel Stein
Chair

Minutes of the May 25, 2012 Committee Meeting

Submitted by Jane Becker, Esq.

The May 25, 2012 meeting of the Tax Procedure & Litigation Committee was held at the IRS Glendale, California Office. Present were the Chair, Michel Stein, the Chair Elect, David Klasing, the First-Vice Chair, Jane Becker and the Second-Vice Chair & Editor, Patrick Crawford. Also present were twenty eight committee members and other attendees.

Welcome and Introductions

The Chair welcomed members to the meeting and thanked David Klasing and all of those who worked so diligently in arranging the meeting.

The Chair reviewed efforts being made with the State Bar to maintain an accurate and updated email list of the committee members and urged all those who have not done so to provide their email and other contact information.

Approval of Minutes

The first order of business was the approval of the minutes of the last meeting. The Chair indicated that the minutes of the last meeting were e-mailed to members in the last newsletter. The minutes were then approved.

IRS Presentation Kym Masera Taborn

The Chair then introduced Kym Masera Taborn, the first of four IRS speakers who spoke on estate and gift tax examinations, appeals and Tax Court litigation. Ms. Taborn is an IRS Estate Tax Supervisory Attorney and manages attorneys in Van Nuys, Camarillo, Santa Maria and Santa Ana, California.

Ms. Taborn reviewed how returns are chosen for audit and issues that arise during audit. She noted that by the time a return is audited at least three IRS employees have reviewed it. Issues identified for audit are usually “large, unusual and questionable” return items, such as inter-family transactions, large real estate holdings, closely held business interests and limited family partnerships.

Ms. Taborn noted that the Estate Tax Attorney (ETA) who conducts the audit cannot consider the hazards of litigation (i.e. cannot “trade” issues). Further, penal
ties cannot be bargained as part of the audit process. In her words, a penalty “either applies or it doesn’t”. Taking into account the hazards of litigation and establishing reasonable cause for penalty abatement are issues to be decided in Appeals and/or litigation.

In the event the decedent’s gift tax returns are missing or unknown, she recommended requesting an account transcript showing all gift tax returns filed under the decedent’s SSN by using Forms 4506-T (a request for an account transcript) and Form 4506 (a request for return copies). These steps will establish due diligence and would help to avoid the imposition of the accuracy related penalty. She also noted that the Service is now digitizing prior year gift tax returns and notes that there were times when the Service did not enter gift tax return information on its records.

Ms. Taborn reviewed the portability provisions enacted in 2010 in which the surviving spouse’s estate may use the unused exemption amount of a predeceased spouse. She noted that this can be done even if the spouses did not have a revocable trust. Estate tax returns filed solely to preserve portability are being examined. If the second spouse dies after the time period to audit the first spouse’s 706 has expired, the Service can review the return of the first spouse to determine the amount of an unused exemption but cannot assess tax for the first spouse’s estate.

Ms. Taborn noted that the IRS is under a hiring freeze and that there has been attrition in the number of ETAs. At the same time, their workloads are increasing.

Her contact information is:

Phone: (818) 756-4522; 
Email: Kym.M.Taborn@irs.gov

John T. Schooler

The Chair then introduced John T Schooler, the Appeals Team Manager. Mr. Schooler supervises Appeals Officers who have sole responsibility for all tax controversy matters affecting trusts and estates (estate, gift and generation skipping transfer taxes as well as income tax issues). Mr. Schooler is also a mediator with the IRS Fast Track Mediation and Fast Track Settlement programs.

There are 13 Appeals Officers who are designated to handle estate and gift tax issues, who work in two national appeals teams. They must be attorneys with estate and gift tax experience. Each has an inventory of 30 to 45 cases. They are managed by two Appeals Team Managers (Mr. Schooler is one).

As this is a national program, in that the Service has centralized estate and gift tax appeals, it is more difficult to have a face to face meeting with an Appeals Officer. For example, there are no E&G Appeals Officers in San Francisco or San Diego.

Appeals will not accept a case for review pursuant to a 30 day letter protest unless there are at least 180 days left on the assessment statute collection expiration date.

Mr. Schooler emphasized the institutional differences between exam and appeals. The role of Appeals is not to be a trier of fact (“Appeals is not the first line developer or investigator of fact”); Appeals Officers are not ETAs or Revenue Agents. It is the Appeals Officer’s role to look at the information as presented and to determine whether there are hazards of litigation justifying settlement. Most cases are “intermediate settlements” – that is, settlements based on the hazards of litigation. For example, if the facts are not completely clear, if the law on a particular issue is gray or if there are decisions on point both favorable and unfavorable to the Service a case may settle based on the hazards of litigation.

Mr. Schooler emphasized that the Appeals Officer is the sole settlement negotiator, i.e. there is no meeting with a Group Manager. The Appeals Team Manager must approve the settlement but he or she is not a party to the settlement.

Mr. Schooler reviewed the ADR (Alternative Dispute Resolution) programs, Fast Track Settlement and Fast Track Mediation. In general, Fast Track Settlement is not available for estate tax returns. However, it is possible to have post appeals mediation. Mr. Schooler encouraged practitioners to use the ADR programs as they save both time and money for the Service and practitioners. Practitioners need to keep in mind, however, that the request for post appeals mediation must be made prior to the issuance of a 30 day letter.

Mr. Schooler’s contact information is:

Phone: (818) 637-3914;
Email: John.T.Schooler@irs.gov

Fabio Ambrosio

The chair then introduced Fabio Ambrosio. Mr. Ambrosio is an estate and gift tax Appeals Officer with the Estate and Gift Tax Team in Glendale, California. Mr. Ambrosio has an L.L.M. in tax, an M.B.A. in international business and is a Certified Fraud Examiner (and a member of the Association of Certified Fraud Examiners).

Mr. Ambrosio emphasized the importance of being prepared, as working with an Appeals Officer is the last chance to settle before litigating. He encouraged practitioners to not “lose sight of the now” and to factually develop their cases.

Mr. Ambrosio recently participated in an estate tax return post appeal mediation in which the parties were able to resolve all issues in one day. He noted, however, that it would be rare to have a post appeals mediation in light of the three year ASED and the fact that the statute for assessment cannot be extended for the exam of an estate tax return.

Mr. Ambrosio has an article to be published in the June/July 2012 Journal of Tax Practice and Procedure which reviews strategic concerns in representing an estate in appeals. He reviews the importance of preparation and discusses when “to escalate “.

Mr. Ambrosio’s contact information is:

Phone: (818) 637-3930;
Email: Fabio.ambrosio@irs.gov.

Donna F. Herbert

The chair then introduced Donna F. Herbert, Senior Counsel (SB/SE), of the IRS Office of Chief Counsel in Thousand Oaks, California. Ms. Herbert has tried over 40 cases before the U.S. Tax Court, including several estate and gift tax cases of national import.

Ms. Herbert discussed estate and gift litigation procedures. A few points:

• If the taxpayer’s case was not given a meaningful review in Appeals, request that Area Counsel return the case to Appeals for further development.
• While the Service may use in-house appraisers for exam, they almost always use outside appraisers as experts at trial. The second appraisal may be useful in settling, as it may be less than the in-house appraisal. Appraisals are required to be provided 30 days before trial; area counsel has the discretion to voluntarily provide such information earlier.
• The parties can stipulate to the deposition of expert witnesses, otherwise, it is unlikely to happen.
• Even if the case isn’t settled in Appeals, the Service can still settle prior to trial.
• Area counsel will support the findings of the Appeals Officer unless new facts come to light, or new authority becomes available.
• The parties must stipulate to all facts that are not in dispute or shouldn’t be in dispute.
• Once the case is tried, it may take another year or two to get a written opinion.
• This lengthy wait is a factor to be taken into account in settling.
• Valuation discounts which appear on their fact to be excessive i.e. 75% are going to be looked at. There are no safe harbors, no magic bullets for what is a reasonable discount; valuation discounts are case and fact specific. The taxpayer must provide appraisals and cannot say on the estate tax return that there is a similar case with a 40% discount, therefore, a 40% discount is appropriate. There are no “matter of law” discounts.

Ms. Hebert’s contact information is:

Phone: (808) 371-6702;
Email: donna.f.herbert@irscounsel.treas.gov

Hot Topics:

Those committee members who attende
d the annual May 2012 Washington trip reviewed their papers and how they were received. Those attending reported favorable responses to their topices, and the benefits of meeting with key members of congressional committees, U.S. Tax Court judges, and others.

Lavar Taylor discussed a new non-profit established through the auspices of his firm and the Chapman University Law School, The Center for the Fair Administration of Taxes. The Center does not take positions on “traditional tax policy” issues; its focus is the fair administration of tax laws. It has filed several amicus curiae briefs and comments and proposed regulations. (See “Special Announcement”).

Special Announcement: Center for the Fair Administration of Taxes (CFAT) Established

Suoo Lee, Esq.

The Center for the Administration of Taxes (CFAT) is a non-profit organization dedicated to ensuring that taxpayers and other parties are treated fairly by the IRS and by state and local taxing agencies in the administration of the tax laws. As part of its efforts to ensure that the tax laws are administered in a fair manner, CFAT files friend of the court (amicus curiae) briefs in court cases which affect the administration of the tax laws. CFAT has filed amicus curiae briefs in cases such as National Federation of Independent Business v. Sibelius, 132 S.Ct. 2566 (2012), the Supreme Court case dealing with the whether the Affordable Care Act was constitutional, and with the tax Anti-Injunction Act, Lantz v. Commissioner, 607 F.3d 479 (7th Cir. 2010), which addressed the validity of regulations issued by the IRS under the “innocent spouse” provisions of the Internal Revenue Code, and Wilson v. Commissioner, Case No. 10-72754 (9th Cir.), another case involving the “innocent spouse” provisions which is pending in the Ninth Circuit Court of Appeals. CFAT has also filed amicus curiae briefs in several Tax Court cases and will continue to file amicus curiae briefs in federal and state court cases the outcome of which may affect the administration of the tax laws.

In the future, CFAT anticipates commenting on proposed regulations and other administrative guidance issued by the IRS and state taxing agencies which affect the administration of the tax laws. CFAT also anticipates engaging in studies and issuing reports on various topics involving the administration of the tax laws and also anticipates holding educational seminars for tax professionals and the public.

CFAT does not represent taxpayers or other parties before the IRS or other taxing agencies. Because CFAT’s focus is on the fair administration of the tax laws, CFAT will not be focusing on “tax policy” as that term is commonly understood. CFAT is dedicated to seeing that the tax laws are enforced in a fair manner, regardless of the type of taxes imposed and regardless of whether tax rates are “high” or “low.”

CFAT’s application for tax-exempt status under section 501(c)(3) is currently pending with the Internal Revenue Service.

CFAT welcomes and strongly encourages donations, which are tax-deductible to the full extent allowed by law. The ability of CFAT to undertake its mission in the future depends directly on donations by tax professionals and members of the public. Donations can be sent to the address shown at the bottom of this page.

CFAT currently employs a full-time staff attorney, Suoo Lee, who obtained her J.D. from the University of Illinois and her B.A. from the University of California at Berkeley. CFAT’s founder, A. Lavar Taylor, has over 31 years of experience in handling civil and criminal tax controversies. He has worked as an attorney in the IRS’ Office of Chief Counsel and as an Assistant U.S. Attorney in the Tax Division of the U.S. Attorney’s Office in Los Angeles, California. He has worked in private practice handling tax controversies since 1989. He currently serves as the Director of CFAT on a volunteer basis.

CFAT also welcomes input from tax professionals inside and outside of the government and the public at large regarding issues that may affect the fair administration of the tax laws. CFAT will hold all such input in strict confidence if requested to do so.

Donations and other communications should be sent to Center for the Fair Administration of Taxes, 201 East Sandpointe, Suite 200, Santa Ana, CA 92707. Lavar Taylor may be reached at 714-546-0445 and at ltaylor@taylorlaw.com.

Articles:

The Importance of the Pretrial Memorandum in Tax Court

Kevan P. McLaughlin, Esq., LLM

In a case before the U.S. Tax Court, unless a basis of settlement has been reached, the Court generally orders each party to prepare and file a Pretrial Memorandum at least 14 days before the first day of the trial session. The Pretrial Memorandum includes pertinent information including the amount(s) in dispute, the status of the case (i.e., probable settlement, probable trial, definite trial), an estimate of trial time, and more.

The author will be first to admit that the temptation always exists to treat the Pretrial Memorandum as a procedural nuisance – something to be completed and filed out quickly, without much thought or strategy, and only as a matter of pure procedure. After all, there are a significant amount of other issues directly related to the disposition of the case that occur leading up to that 14 day deadline. However, the importance of this requirement cannot be over-emphasised. The Pretrial Memorandum is the opportunity for the practitioner to make their first impression upon the Tax Court Judge, and several strategies should be kept in mind to serve this very important goal.

First, approach the “Witness(es) You Expect to Call” portion for what it truly asks. On the fourth page of most Standing Pretrial Orders, or second page of the Pretrial Memorandum template, the Tax Court asks for practitioners to list witnesses and provide a brief summary of their expected testimony. A summary of their testimony should be contrasted with just merely listing why they are being called as a witness in the first place. Instead of stating a witness will “Discuss the nature of the petitioner’s trade and business,” practitioners have the opportunity to influence the theme of a case with more. Instead, practitioners should strive to actually summarize that testimony which is expected. For example: “John Smith’s testimony is expected to be that he first met the petitioner 5 years ago, and since that time he has worked for, and been intimately involved in petitioner’s firm. He is also expected to testify that during the tax year before the Court he and the petitioner entered into a written agreement to purchase the latter’s firm for a sum of $900,000 based on thorough negotiations and reviewing comparable sales metrics.”

Second, practitioners have the opportunity to influence the theme of their case by properly framing the issues presented to the Court. Not only is presenting the issues important generally, it is the first substantive element of the Pretrial Memorandum, and thus one of the first influences on the Judge’s impression. Practitioners should state the issue fairly, but framed it in a way that suggests a desired outcome. For example, instead of framing the issue as “Did petitioners have unreported income,” a practitioner has the ability to influence the theme of their case, and perhaps the ultimate outcome, by proffering the issue as “Did respondent properly determine, through permissible methods, that petitioners had unreported income?”

Lastly, no one likes to be blindsided with difficult questions of law on the spot, especially on the eve of trial. Properly using the “Evidentiary Problems” portion of the Pretrial Memorandum eliminates this problem for the Tax Court Judge, contributing further to a good first impression. Listing the specific exhibits and/or witness, and the basis for the objection here in addition to the Stipulation of Facts, undoubtedly makes for an ea
sier job and therefore happier Judge.

Ultimately the Pretrial Memorandum is the first chance a Tax Court Judge has to acquaint him or herself with your case. By treating it as an important part of that case, practitioners can seize on an opportunity to create a favorable first impression and, hopefully, a first step towards persuading the Judge in their favor.

Kevan McLaughlin is the owner of McLaughlin Legal, a San Diego firm practicing specifically in matters of tax controversies.

info@mclaughlinlegal.com

McLaughlin Legal 
6265 Greenwich Drive, Suite 100 
San Diego, CA 92122 
www.mclaughlinlegal.com

Update: California’s Financial Institution Record Match (Firm) and Delinquent Taxpayers

Sanford I. Millar, ESQ., MBT

Last year (August 2011 Newsletter) I wrote a comment on recently enacted SB 86. Among the three sections of SB 86 is the Financial Institution Record Match system (FIRM). The following is an update to that comment. In a letter to financial institutions dated June 12, 2012, the Franchise Tax Board 1 stated that it “expects to issue more than 475,000 Orders to Withhold, an increase of 75 percent over last year.” The increase in Orders to Withhold will largely be based upon implementation of FIRM.

Under FIRM, financial institution records are matched against customer records to determine if a person on the FIDM list has an account subject to levy by way of Order to Withhold. From this process comes the new California system R&T § 19266(a) establishing the Financial Institution Record Match System (i.e. FIRM). FIRM requires that all financial institutions (with some exceptions) doing business in the state provide to the FTB on a quarterly basis the name, record address and other addresses, social security number or other taxpayer identification number, and other identifying information for each delinquent tax debtor, as identified by the FTB, who maintains an account at the institution. Unless required by other law, the financial institution providing the information is prohibited from disclosing to an account holder that it has furnished the information to the FTB. Just how expansive the record match will need to be for the very large financial institutions is unclear. The financial institutions may need clarification on whether they need to do nationwide record searches, regional searches or statewide searches. FIRM is intended to comply with the California Right to Financial Privacy Act (the Act) by meeting an exception to the Act, in that the use of the information provided by the financial institutions is limited to the collection of delinquent taxes or other debts referred to the FTB for collection. All other uses are expressly prohibited.

“Financial Institutions” is broadly defined to include depository institutions, institution affiliated parties (like captive brokerage affiliates and private banks), federal and state credit unions and benefit associations, insurance companies, safe deposit companies, money market funds or similar entities authorized to do business in California2

“Account” is just as broadly defined and includes, demand deposit accounts, share or share drafts accounts, checking or negotiable withdrawal order accounts, savings accounts time deposit accounts or money market mutual fund accounts, regardless of whether the account bears interest3

A “delinquent tax debtor” means any person liable for any income or franchise tax or other debt referred to the FTB for collection where the obligation remains unpaid after 30 days from demand for payment and the person is not making timely installment payments under an agreement pursuant to R & T §19006.4

There is an analogy between what FIRM has done with respect to record searches and the federal governments action in enacting the Foreign Account Tax Compliance Act (FATCA)(IRC §1474-1474). FATCA requires foreign financial institutions that have U.S. accounts to enter into information-exchange agreements with the Internal Revenue Service which provide that they will search their records and provide record information to the Service for all customers who are U.S. persons. FATCA is, in essence, a class reporting system as opposed to an individual reporting system. The class in question is (in general) all U.S. persons with accounts in a foreign financial institution. A record match system may occur later when the IRS compares FATCA reports with income tax return disclosures required under new IRC§6038D.

The focus of enforcement is now clearly on financial institutions as a tool of compliance. The State Legislature has shifted the costs of information gathering to financial institutions, much like Congress has shifted the costs of information gathering through FATCA. Just how these costs will be distributed to customers in the form of fees or lower rates of return remains to be seen.

Sanford Millar, Esq., MBT
smillar@millarlaw.net

Law Offices of Sanford Millar
1801 Avenue of the Stars, Suite 600
Los Angeles, California 90067
www.millarlawoffices.com
310-556-3007

Recent Cases of Interest

Robert S. Horwitz, Esq.

I won’t try to parse the Court’s logic in the Affordable Care Act case. Far more able persons have done so already.

In its ongoing investigation of taxpayers who hid assets in offshore bank accounts, the Department of Justice has been using grand jury subpoenas directed to the target requiring the target to produce records of the offshore accounts that are required to be kept under 31 C.F.R. §1000.420 (previously 31 C.F.R. §103.32). Last year, the Ninth Circuit, in a case of first impression, held that the required records exception to the Fifth Amendment privilege against self-incrimination applied, so that a target could be required to produce the records. In re M.H., 648 F.3rd 1067 (9th Cir. 2011), cert. denied (6/25/2012). On August 27, 2012, the Second Circuit held that the required records doctrine applied to a similar subpoena and that the target could not resist compliance on the ground that the act of production was itself incriminating. In re Special February 2011-1 Grand Jury Subpoena, No. 11-3799.

The facts follow the same pattern as those in In re M.H. The target was being investigated for using offshore bank accounts to evade federal taxes. The grand jury issued the target a subpoena requiring him to produce all records required to be maintained under the regulations relating to foreign financial accounts he had a financial interest in or over which he had signatory authority. He resisted production on Fifth Amendment grounds. The district court (unlike the district court in In re M.H.) refused to enforce the subpoena on the ground that it would violate the target’s Fifth Amendment privilege. The Second Circuit reversed.

The Second Circuit began by outlining the origin and development of the Required Records Doctrine to the privilege against self-incrimination, beginning with Shapiro v. United States, 335 U.S. 1 (1948), which involved an administrative summons issued under the Emergency Price Control Act passed during W.W. II.

As summarized by the Second Circuit, the Required Records Act Doctrine requires the Government to prove three things: 1) the purposes of the government inquiry must be essentially regulatory; 2) information is to be obtained by requiring the preservation of records which the regulated party has customarily kept; and 3) the records themselves must have assumed a public aspect that renders them “at least analogous to” public documents.

The Second Circuit next turned to the targ
et’s argument that the doctrine is not applicable to his case, since the act of producing the documents is compelled, testimonial and self-incriminating. Under the Fifth Amendment, the act of producing incriminating documents under Government compulsion may have testimonial aspects that are protected, since production would concede the existence of the records, their authenticity and that the defendant has possession of them.

The Second Circuit noted that the Government’s position was supported by several cases in which the required records doctrine was applied to “negate a witness’s act of production privilege.” It rejected the target’s argument that in the cases relied on by the Government, one or more of the requirements for application of the Fifth Amendment did not exist. According to the Court

One of the rationales, if not the main rationale, behind the Required Records Doctrine is that the government or a regulatory agency should have the means, over an assertion of the Fifth Amendment Privilege, to inspect the records it requires an individual to keep as a condition of voluntarily participating in that regulated activity. [Citations omitted.] That goal would be easily frustrated if the Required Records Doctrine were inapplicable whenever the act of production privilege was invoked.

The Court then turned to the question of whether the doctrine applied to the case before it. Rather than conducting an analysis of whether each element was met, it noted that the Ninth Circuit addressed the question in In re M.H. and that there was no need to repeat its analysis. The three requirements were met. Thus, it reversed the district court’s order granting the target’s motion to quash the subpoena.

One case of interest is Dalton v. Commissioner, 682 F.3d 149 (1st Cir. 2012), addressing the standard of review to be used by the Tax Court in collection due process cases.

Over ten years before the liabilities arose, the taxpayers, Arthur and Beverly Dalton, deeded two parcels of real estate in Maine to the taxpayer-husband’s father, Arthur Sr. Arthur, Sr., placed the two parcels and an adjacent parcel he subsequently purchased into a trust. The trust’s beneficiaries were the taxpayers’ children, to whom the corpus was to be distributed after the deaths of the taxpayers and Arthur Sr. After the transfer to the trust, the taxpayers paid for the upkeep of the property, signed various documents identifying themselves as owners and, following the loss of their home, took up residence in the house located on the property. When Arthur Sr. died, the taxpayers had Beverly’s brother appointed trustee, even though he lived in Texas and had little involvement in the trust or the real estate.

As a result of the collapse of a business they owned, a trust fund penalty was assessed against the taxpayers. In response to a notice under IRC sec. 6330, the taxpayers requested a CDP hearing and submitted an offer in compromise. The Appeals Officer rejected the taxpayers’ proposed offer on the ground that the trust held the real property as their nominee and that the liquidation value of the real property was sufficient to full pay the liability. The taxpayers appealed to the Tax Court, which held that the trust was not the taxpayers’ nominee under applicable state (Maine) law and that the IRS had abused its discretion in rejecting an offer. The Tax Court also awarded attorney fees to the taxpayers.

The First Circuit began its analysis by noting that the taxpayers and the IRS agreed that, where the underlying tax liability is not in dispute, the IRS’s disposition of a CDP case is reviewed for abuse of discretion without any special deference to the Tax Court’s determination. The parties disagreed on the standard of review to be applied to the legal and factual findings underlying the IRS’s determination. The taxpayers argued that the IRS’s finding as to any legal issue was subject to de novo review, while the IRS argued that a more deferential standard was to be used.

The First Circuit looked to the legislative history of the CDP provisions of the Internal Revenue Code. According to the Court, the purpose of the CDP provisions was to provide the taxpayers with a pre-attachment means of review to ensure that the IRS action was not groundless and that taxpayers were not subject to harassment. Unlike other types of administrative hearings, a CDP hearing does not require i) a face-to-face hearing, ii) formal discovery, iii) testimony or cross-examination, or iv) a transcript It is a very informal process in which the “hearing” often consists of written and oral communications between the taxpayer and the IRS. After the “hearing,” and the consideration of any collection alternatives, the IRS Appeals Office makes a determination.

Because of the informal nature of the CDP process, the First Circuit concluded that it makes little sense for a reviewing court to engage in a de novo review of the legal and factual determinations underlying the IRS Appeals Office’s determination. This was especially true where the question addressed at the CDP hearing was intensely factual in nature. The Court held that in a CDP case the purpose of judicial review

… is not to review the IRS’s CDP determinations afresh. Rather, its job is twofold: to decide whether the IRS’s subsidiary factual and legal determinations are reasonable and whether the ultimate outcome of the CDP proceeding constitutes an abuse of the IRS’s wide discretion.

The First Circuit then discussed why it determined that the Appeals Office did not abuse its discretion. The First Circuit noted that while Maine recognizes the nominee doctrine, Maine case law did not fully delineate its contours. Given the dearth of precedent, it was a reviewing court’s duty to determine whether the IRS applied a reasonable view of what the applicable law might be, not whether its view would ultimately be considered correct. The Appeals Office’s use of a “balancing test” to decide whether the trust was the taxpayer’s nominee was reasonable.

The Court stated that this did not work an undue deprivation on the taxpayers, since the taxpayers would have an opportunity to have a judicial determination of whether they were nominees at a later date. The Court ended its discussion as follows:

Although this appeal presents a question involving the IRS’s determination of a mixed question of fact and law, our analysis has broader implications. Whether an IRS determination reached during the CDP process rests upon a purely factual question, a purely legal question, or a mixed question of fact and law, a reviewing court’s mission is the same: to evaluate the reasonableness of the IRS’s subsidiary determination. The CDP process presents no occasion for a reviewing court to demand incontrovertibly correct answers to subsidiary questions, whatever their nature. Rather, the IRS acts within its discretion as long as it makes a reasonable prediction of what the facts and/or the law will eventually show.

In 2010, a United States district court, in a case of first impression, held that the Government had failed to prove that a taxpayer willfully failed to file an FBAR by clear and convincing evidence. The case, United States v. Williams, 2010-2 USTC ¶50,623 (E.D. VA 9/1/2010), was seen as a major victory for taxpayers. The Government appealed. On July 20, 2012, in an unpublished opinion, the Fourth Circuit reversed, holding that the district court clearly erred in finding that the Government did not prove that the taxpayer willfully failed to file an FBAR for 2010. United States v. Williams, 2012-2 USTC ¶50,475.

The taxpayer, J. Bryan Williams, had $7 million in a Swiss bank account in the name “ALQI” from 1993 until after 2001. For the years 1993 through 2000, he did not report the income from the account and did not file any FBARs. In late 2000, Swiss authorities and the IRS became aware of the account. At the IRS’s request, Switzerland froze the account. Although
aware that the IRS knew about the ALQI account, Williams did not report the income from it on his 2000 return and did not file an FBAR for 2000. He first reported the account on his 2001 return and on the FBAR for 2001, both of which were filed in 2002. He applied to participate in the IRS’s 2003 voluntary disclosure initiative for taxpayers who used offshore credit cards and other offshore financial arrangements. As part of his application, he filed amended returns for 1993 through 2000. His application was rejected. He was prosecuted for conspiracy to defraud the IRS and tax evasion.

Williams pled guilty. At sentencing, he admitted that he knew that the funds deposited in the Swiss account and the interest on the funds were taxable to him and that he did not report them in order to evade tax. He also admitted that he did not report the accounts to the IRS as part of his attempt to evade tax by not reporting income from the Swiss account. In 2007, Williams filed FBARs for 1993 to 2000. The IRS assessed willfulness penalties against him for 2000. When he failed to pay, the Government sued Williams, only to have the district court hold that it failed to prove willfulness by clear and convincing evidence.

After reciting the facts, the Fourth Circuit began its analysis with the proposition that it reviews factual findings under the clearly erroneous standard and that its scope of review under this standard is very circumscribed. Nonetheless, the two judge majority found that the district court committed clear error. To support its determination, the majority pointed to the following facts:

1. Williams filed his tax returns under penalty of perjury and thus had constructive knowledge of its contents, including the directions on line 7a of Schedule B about the need to consult the FBAR instructions. Thus, he was on notice of the FBAR filing requirement.
2. Williams’ testimony at trial that he did not read over the returns when he signed them, including line 7a. The majority said that this showed he made a conscious effort to avoid learning about the reporting requirements which, combined with his concealment of income, was “a sufficient basis to establish willfulness….”
3. Williams’ statements at sentencing that he did not report the accounts as part of his attempt to evade tax.

According to the majority, this established, at the very least, “reckless conduct, which satisfies the proof requirement under §5314.

The dissent pointed out that while there was substantial evidence to support a determination of willfulness, there was also evidence to support the district court’s determination, including: Williams’ testimony that he did not know of the reporting requirement; that in June, 2001, when the 2000 FBAR was due, Williams was aware that the Government knew about the Swiss account and, thus he had no motive to refuse to file an FBAR; and that when Williams and his tax consultants filed amended returns in 2003, which checked the “yes” box about having foreign accounts, they did not file past due FBARs. The dissent also noted that the district court was correct in stating that Williams’ statements at sentencing were not an admission that he knew about the requirement to file FBARs or that he willfully failed to do so.

Cicero, Illinois, is a city and township on the western border of Chicago. It has a colorful history. In the 1920s it was Al Capone’s place of refuge when things got too hot in Chicago. It was the scene of a violent protest against a civil rights march led by Dr. Martin Luther King. It has been home to a number of colorful political figures, including Betty Loren-Maltese, whose “coiffure is legendary in Chicagoland,” and her late husband Frank. Ms. Loren-Maltese is the former president of the Cicero board of trustees and former chair of the Republican party in Cicero. Her late husband was a politician who confessed to being a mob bookmaker and pled guilty to federal gambling charges.

After a long career in local politics, Ms. Loren-Maltese found herself the target of a federal grand jury investigation. In 2001, she was indicted with several co-defendants for conspiracy to defraud Cicero through a pattern of racketeering, including bribery, money laundering, mail and wire fraud, misconduct and interstate transportation of stolen property. After a lengthy trial, she was convicted in 2002. The conviction was affirmed by the Seventh Circuit. After a separate trial on criminal tax charges, the jury hung and the Government decided not to retry the case. Ms. Loren-Maltese was incarcerated until 2010.

As usually happens after a criminal tax prosecution, successful or not, the IRS issued a notice of deficiency to Ms. Loren-Maltese for 1993, alleging fraud. While still incarcerated, she filed a petition with the Tax Court. In Loren-Maltese v. Commissioner, T.C. Memo. 2012-214, the Tax Court dealt with the civil tax consequences of Ms. Loren-Maltese’s conduct. The Tax Court framed the three main legal issues before it as follows:

It’s the facts that make this case interesting, but there are three issues of law that color its background: the general rules of tax fraud, the proper tax treatment of money taken by a politician from her campaign fund for personal use, and the effect of taking the Fifth Amendment in civil litigation.

In asserting fraud, the IRS relied heavily on evidence developed in Ms. Loren-Maltese’s criminal trials. Following Ms. Loren-Maltese’s release from prison, a short trial was held by the Tax Court. As you are probably aware, in Tax Court, the parties normally stipulate to many of the facts and exhibits. The stipulation in this case was described by the Tax Court as follows:

[W]e held a short trial in Chicago whose record was supplemented by the parties’ stipulated admission — “as testimony and exhibits in this proceeding” — of slightly fewer than 10,000 pages of transcript and numerous exhibits from her criminal trials. n5

n5 We therefore accept as testimony for purposes of this trial all of the testimony that took place in the criminal trials, and we (like the parties) used the documentary evidence extensively. * * * *

From this massive body of evidence the IRS focused on its “very detailed analysis of two transactions”: Ms. Loren-Maltese’s purchase of a limited edition 1993 Cadillac Allante convertible, and her investment in a luxury golf course and clubhouse. The $350,000 for these two transactions came from Ms. Loren-Maltese’s re-election fund (“the Committeeman Fund”). The IRS contended that the $350,000 was income to her and that she fraudulently tried to evade the tax due on that income. An elected official who uses re-election or campaign funds for personal expenses, including investments, is taxable on the money used. If the funds are used for expenditures or investments for the fund, they are not taxable. The Cicero city attorney explained this to Ms. Loren-Maltese before she engaged in the transactions in question.

The IRS had substantial evidence to support its claim of fraud. The taxpayer was “mostly silent during her trial in our Court, relying on her attorney’s advice to take shelter under the Fifth Amendment.” The Court pointed out that the IRS had evidence to support the inferences of fraud. It also pointed out that Ms. Loren-Maltese’s invocation of the her privilege against self-incrimination hurt her.

With respect to the fraud allegation, the Court noted “Fraud requires a state of mind — it is commonly defined as an ‘intentional wrongdoing’ on the part of the taxpayer with ‘the specific purpose to evade a tax believed to be owing.’” Since taxpayers rarely admit fraud, the Court focused on the “badges of fraud” that the IRS claimed were present, including:

• inadequate records;
• implausible or inconsistent explanations of behavior;
• concealing assets;
• engaging in illegal activities; and
• attempting to conceal activities.

It also considered Ms. Loren-Maltese’s background, sophistic
ation, experience, and education. Ms. Loren-Maltese had a substantial business background as a realtor before entering politics and had served in a number of offices that required her to be knowledgeable about finances. When she purchased the Cadillac, she read the contract over carefully, knew that it was being purchased in her name personally, and not as the agent for the Committeeman Fund. This was contrasted with her purchase of a Jeep, which was purchased by her as agent for Cicero Township. Ms. Loren-Maltese had the car insured on her personal policy. It was registered in her name personally. No one ever saw her drive the Cadillac to any political event or Township meeting. She rarely used the car in town. Most of the time she kept it at a vacation home.

As to the real estate investment, Ms. Loren-Maltese had the investment made in her name individually and directed the attorneys who researched holding title as co-tenants with several entities that the property was to be held in her name personally. Given her background as a real estate agent, she knew about the importance of title. The Court found that the evidence was sufficient to support an inference of fraud.

With respect to the consequences of Ms. Loren-Maltese’s invocation of her Fifth Amendment privilege, the Court stated that regardless of the validity of her claim, “even a valid invocation of the Fifth Amendment allows us to draw a negative inference from her refusal to answer a question if the Commissioner produces some additional supporting evidence. … We can also draw inferences from her silence if, under the circumstances, it would’ve been natural for her to object.” The Court noted that Ms. Loren-Maltese invoked the Fifth in response to all but one question about the car and her failure to report the use of Committeeman Fund money to buy it on her tax return. The only time she did not invoke the Fifth on this issue was to testify that

she didn’t go ‘cruising around’ Town with the top down because she ‘wouldn’t want to mess up [her] hair.’ On this narrow issue, we find her entirely credible, but the evidence that her use of the Cadillac was personal rather than political is overwhelming. Though she was a good-humored, engaging, and credible witness when actually answering questions, her silence on substantive questions severely injured her case — not only because we specifically warned her that claiming the Fifth Amendment would allow us to draw a negative inference, but because the Commissioner’s voluminous evidence against her strongly supported that inference.

Based on the evidence presented by the IRS, and Ms. Loren-Maltese’s invocation of the Fifth in response to questions concerning the car and the golf course investment, the Court held that the IRS had met its burden of proving fraud as to those two items. Thus, the statute of limitations on assessment had not run when the notice of deficiency was issued.

Paul M. Daugerdas was a partner at the Chicago office of Jenkins & Gilcrist. He made his reputation by marketing to high net worth taxpayers the Son of BOSS tax shelter. After what has been described as the largest and costliest tax fraud prosecution in history, Daugerdas and three of his co-defendants were convicted of conspiracy to defraud the U.S., tax evasion, and corruptly impeding the functioning of the IRS. The conviction was hailed as a major victory in the Government’s fight against abusive tax shelters. The victory did not last long. In United States v. Daugerdas, 2012 U.S. Dist. LEXIS 82597 (S.D.N.Y. June 4, 2012), Judge William Pauley granted a motion for new trial as to three of the four defendants based on juror misconduct.

The misconduct centered upon a juror identified as Catherine Conrad. During voir dire, Ms. Conrad identified herself as a housewife whose husband was a retired business owner. She claimed that she had a bachelor’s degree in English, but no further schooling. Shortly after the jury handed down its verdict, Ms. Conrad sent a two page “mash note” to the prosecutor, praising the prosecution’s efforts on behalf of “Our Government” to convict the defendants. In her note, Conrad stated that she fought against, but ultimately gave in, on a not guilty verdict on the conspiracy count against one of the defendants. She ended her missive “I have learned, the saying a ‘federal case’ is REALLY a ‘federal case’, and I feel privileged to have had the opportunity to observe la crème de la crème – KUDOS to you and your team !!!” The prosecutor brought the letter to the attention of the court and the defense, which began an investigation that culminated in a motion by the four defendants for a new trial.

As the result of the investigation and a post-trial hearing at which Conrad testified under a grant of use immunity, it came out that she was a suspended lawyer who lied in voir dire in order to make herself in her own word “marketable” so that she could have “an interesting trial experience” as a juror. Besides concealing her membership in and suspension from the bar, Conrad also concealed her own criminal convictions for shoplifting, DWI, contempt and aggravated harassment and her husband’s extensive criminal history, which included a seven-year stretch in prison. The court found that she made a “calculated, criminal decision to get on the jury.”

Conrad testified at the hearing that if the truth were known, “defense counsel would be wild to have me on the jury.” She made snide comments to defense counsel during her examination. She also testified that in her view “most attorneys” are “career criminals.” Two of the four convicted defendants were practicing lawyers; one of the defendants, David Parse was a non-practicing lawyer. The fourth defendant was a CPA with BDO Seidman.

Judge Pauley, who was clearly upset by the need to retry three month criminal tax case, strongly urged the government to prosecute Conrad: “The prospect of preserving a tainted jury verdict should not temper the Government’s resolve to call Conrad to account for her egregious conduct.” Any prosecution of Conrad, however, obviously would encounter problems because of the use immunity given her for purposes of the hearing.

Based on McDonough Power v. Greenwood, 464 U.S. 548 (1984), the Court found that in order to obtain a new trial, the moving party must “first demonstrate that a juror failed to answer honestly a material question on voir dire and then further show that a correct response would have provided a valid basis for a challenge for cause.” A juror deliberately lying her way onto the jury may not be sufficient to require a new trial. The test whether the juror’s truthful answers would have led to a challenge for cause?

Based on what truthful answers during jury selection would have been and the evidence adduced at the post-verdict hearing — including Conrad’s discovered dishonesty, bias and her animus to lawyers — the Court found that the McDonough criteria were met. Accordingly, it ordered a new trial for three of the convicted defendants.

The one defendant whose motion was denied was David Parse. Parse’s lawyers had obtained information about Conrad prior to jury deliberations that, in the Court’s view, should have put them on notice that Conrad was not who she claimed to be. Parse’s attorneys, in the new trial motion, stated that they were “prompted” to investigate and conduct records searches “in the wake of Conrad’s . . . post-verdict letter.” The Court found that the motion contained “significant factual misstatements” and that its “clear implication” was to give the false impression that Parse’s attorneys did not know and had no reason to know of Conrad’s lies until after the verdict. In fact, as revealed during the hearing in Parse’s attorneys e-mails during trial, which were produced in response to the Court’s order, and in testimony by the attorneys at the hearing, the Parse’s attorneys were suspicious about Conrad, based on record searchs, by the time of the Court’s charge to the jury. One e-mail before jury deliberations, discussin
g a record search that showed a “Catherine Conrad” as a suspended lawyer, stated “Jesus, I do think it’s her.”

As a result of their suspicions, the Court ruled that Parse had waived his claim for a new trial since his attorneys knew or “with a modicum of diligence would have known” that Conrad’s statements in jury selection were false and misleading and failed to disclose that knowledge to the court. The Court suspected that the attorneys’ submission was designed to foreclose any government claim that their pre-verdict knowledge doomed their post-verdict motion on the grounds that they failed to act with “due diligence.” The court found unconvincing the attorneys’ claim that, notwithstanding the similarities between the juror and the suspended lawyer discovered by electronic research (including name, home town, father’s occupation, approximate age), they did not believe that juror Conrad and suspended lawyer Conrad were the same person until after her letter to the government was disclosed. The Court thus found that Parse’s attorneys had “actionable intelligence” that Conrad was an imposter and that they had been required, but failed, to undertake “swift action” to bring the matter to the court’s attention.

The Court ended its opinion by stating:

Oaths are sacred and their origins ancient. They acted as a self-curse, and those who swore to one believed dire consequences flowed from its violation. That belief undergirded the oath’s effectiveness and validated its purpose. [Citation omitted.] Today, the need to punish perjurers-through contempt proceedings, criminal prosecutions, or both-is no less acute. While the decision to prosecute Conrad for perjury is not this Court’s, the Government should have a strong incentive to punish such conduct and deter others. The prospect of preserving a tainted jury verdict should not temper the Government’s resolve to call Conrad to account for her egregious conduct.

Jury selection is integral to the organization of a trial. As officers of the court, attorneys share responsibility with a judge to ensure the integrity of the proceedings. In this respect, counsel and the court are joint venturers. An attorney’s duty to inform the court about suspected juror misconduct trumps all other professional obligations, including those owed a client. Any reluctance to disclose this information-even if it might jeopardize a client’s a position be squared with the duty of candor owed to the tribunal.

At a minimum, Parse’s attorneys had a suspicion that Juror No.1 was not the person she represented herself to be during voir dire. That suspicion leavened into tangible evidence that Conrad was a monstrous liar. And Parse’s attorneys knew–or with a modicum of diligence would have known–of Conrad’s misconduct before the jury rendered its verdict. But they gambled on the jury they had. Accordingly, Parse’s attorneys’ failure to bring Conrad’s misconduct to the attention of the Court leads to the anomalous, but entirely just, result that Daugerdas, Guerin, and Field’s motion for a new trial is granted, while Parse’s is denied.

Defendant Parse subsequently retained new counsel, who have filed a habeas corpus petition to set aside the verdict on the ground that his prior attorneys rendered ineffective assistance of counsel by not bringing their suspicions about Conrad to the Court’s attention by the start of jury deliberations.

The perils of joining criminal tax charges with other charges was discussed by the Second Circuit in United States of America, v. Litwok, 678 F.3rd 208 (2012). There, the defendant had been convicted of mail fraud in connection with a false insurance claim and three counts of tax evasion. On appeal, the Second Circuit reversed two of the tax evasion counts and vacated the mail fraud conviction on the ground that it was improperly joined with the tax evasion charges.

Litwok operated several private equity companies, including Kohn Investment, L.P. (“the L.P.”). She had several houses in the Hamptons. She placed the title to two of her houses in the name of a close friend. The houses were insured by a subsidiary of Chubb Insurance Company in the name of the friend. Chubb received claims for damage to both homes, and claims for lodging while one of the homes was being repaired. Chubb issued a check for the lodging. The lodging claim was the basis for the mail fraud count.

Litwok had a pattern of commingling the funds of the equity companies she managed and her personal funds. She used funds she received from her corporate investors to pay for personal expenses and gifts. Although she owed approximately $1.5 million in taxes for 1995, 1996 and 1997, she failed to file any individual income tax returns for those years.

At trial, one of her former CPAs testified about work his firm did for Litwok and her companies from September 1995 to September 1996, including determining income and losses for the LP and preparing the 1995 K-1s. This CPA testified that he confronted Litwok after discovering over $2.3 million in excess personal compensation based on a review of various documents. Litwok claimed that the documents used were inaccurate, but stopped the CPA’s efforts to verify this. Litwok tried to stop the CPA from notifying the L.P.’s partners that he could not prepare their K-1s because of Litwok.

A second of Litwok’s CPAs testified that his firm prepared Litwok did not file income tax returns his firm prepared for years prior to the years charged in the indictment. A third CPA testified that he confronted Litwok about what appeared to be $1 million in excess personal compensation, and refused her repeated demands to adjust his accounting for her 1994 partnership tax return.

Under Federal Rule of Criminal Procedure 8(a), criminal charges may be joined if “of the same or similar character, or are based on the same act or transaction, or are connected with or constitute parts of a common scheme or plan.” In Litwok’s case, there was no relationship between the tax evasion and mail fraud counts. Finding that improper joinder prejudiced Litwok, the Second Circuit held that evidence was sufficient to sustain the mail fraud conviction, but vacated and remanded because the wire fraud charge had been improperly joined with the tax charges.

The Government was required to prove three elements to convict for tax evasion: “(1) the existence of a substantial tax debt, (2) willfulness of the nonpayment, and (3) an affirmative act by the defendant, performed with intent to evade or defeat the calculation or payment of the tax.” The Second Circuit held that there was sufficient proof that Litwok engaged in an affirmative act to evade taxes for 1995, but not for 1996 and 1997.

For 1995, the Second Circuit noted that the most significant testimony was that of the CPA who testified that Litwok barred him from verifying the accuracy of documents she claimed were inaccurate and thereby prevented him from preparing 1995 K-1s for the L.P.’s partners, including Litwok. Based on this testimony, the Second Circuit concluded that a rational juror could find that Litwok actively prevented the filing of her returns that year, which was an affirmative act sufficient to sustain her conviction as to 1995.

The only evidence adduced as to 1996 and 1997 was that Litwok failed to file returns for that year. Absent evidence of one or more affirmative acts beyond a mere failure to file tax returns, the convictions for those years could not be sustained.

On remand, the Government can retry separately the mail fraud count and the 1995 tax evasion count.

Robert S. Horwitz, Esq. 
horwitz@taylorlaw.com

Law Offices of A. Lavar Taylor
6 Hutton Center Dr., Ste. 880
Santa Ana, CA 92707
www.taylorlaw.com
(714)-546-0445

Note from the Editor

Tax Network is published quarter
ly.

Editor: Patrick Crawford Esq.

Editor’s Note

Special Note: we were unable to include an article that was initially slated for this issue of the newsletter. We will either distribute a supplement to this edition or include this fine piece in the next edition of the newsletter. I thank the authors, the readers and the committee for their patience.

This is I would like to thank the authors, first and foremost, for writing such informative (sometimes provocative) and always well-researched articles. These authors represent the best of our profession and we are indeed privileged to have them contributing at such a high level to our committee’s newsletter. Working with them has been an enjoyable and educative experience. Once again, TPL committee members Jane Becker, Robert Horwitz, David Klasing, and Michel Stein have been very generous in their encouragement, support and collegiality. I am looking forward to assisting the new editor in the transition. I will miss working with the committee and, most of all, working with the authors and learning from their excellent work.

This publication is designed as a discussion vehicle for professionals. The ideas presented herein should be researched independently and adequately, and not relied upon. This publication is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the service of a competent professional should be sought

Committee Roster and Past Chairs

Chair
Michel R. Stein
Attorney at Law
Hochman, Salkin, Rettig, Toscher & Perez
9150 Wilshire Boulevard, Ste 300
Beverly Hills, CA 90212-3414
stein@taxlitigator.com
www.taxlitigator.com
Tel: 310-281-3200
Fax: 310-859-1430

Chair Elect
David Warren Klasing
Attorney at Law & CPA
The Tax Law Offices of David W. Klasing
2372 Mores Avenue
Irvine, CA 92614
dave@taxesqcpa.net
www.klasing-associates.com
Tel: 949-681-3502
Fax: 949-681-3504

1st Vice-Chair & Secretary
Jane Becker
Attorney at Law
The Law Offices of Jane Becker
1537 Pacific Avenue
Santa Cruz, CA 95060
becktax@inreach.com

Past Committee Chairpersons:

2011 Robert Horwitz
2010 Michael R.E. Sanders
2009 Kornelia Davidson
2008 LaVonne D. Lawson
2007 Cathy Stahler
2006 Joseph A. Broyles
2005 David B. Porter
2004 Steve Blanc
2003 Edward T. Perry
2002 Abraham Brown
2001 Dennis Perez
2000 Dennis Brager
1999 Woody Rowland
1998 Judy Hamilton
1997 Charlene Woodward
1996 David Lee Rice
1995 R. Todd Luoma
1994 A. Lavar Taylor
1993 Jennifer Miller Moss
1992 Evan Smith
1991 Mark Ericsson
1990 Jennifer Miller Moss