What is it with Florida dentists? They seem to have tax troubles way out of proportion to their numbers. I don’t think you can be stupid and still make it through dental school, but it does seem that you can do so and be remarkably slow to catch on.
That’s the case with a Florida dentist featured in a Tax Court case yesterday. He served a four-year sentence for tax evasion, but he still doesn’t get this tax thing. The Tax Court was hearing his objection to 75% civil fraud penalties on 14 years of unpaid taxes. It went badly for him:
Notwithstanding his recent incarceration, petitioner’s denials and defiance of his tax obligations continued through the time of trial of these cases. He admitted that he did not file returns for any of the years in issue. He did not dispute any of the facts establishing his receipt of substantial taxable income during the years in issue, and his receipt of specific items of income was deemed admitted pursuant to Rule 90 by his failure to respond to requests for admissions.
He hasn’t exactly become remorseful:
Petitioner argues that he had no intention of breaking the law and that his admitted failure to file returns was not fraudulent. His filings and his testimony are replete with implausible and inconsistent explanations of his behavior. He claims that he acted in accordance with the directions of the “trustees”, but there is no evidence that anyone other than petitioner and his wife controlled any of the transactions or earned any of the income attributed to him. He admits that the trusts were funded by “gifts” from him, that his personal expenses were paid from trust bank accounts, and that properties purchased in the names of various trusts were used by him for professional and personal purposes. According to his testimony, the beneficiaries of the trusts were his children and grandchildren. He claims that his accountant made mistakes reporting pension plan distributions, and he asserts that his criminal conviction resulted from false testimony. He asserts that
My decision to quit paying the tax was made in 1992, not before, and was the result of a letter sent, asking for the basis for their taxing me which received a reply after about 3 months, which was no answer to my question, but simply stated to ignore any correspondence received from them until I received an answer.
That sounds like somebody who sent one of those stupid “show me the law” letters to the IRS and then stopped paying taxes when the IRS didn’t take it seriously.
He also asserts the venerable, “I did nothing wrong, and it’s the accountant’s fault anyway” defense:
In a statement at the conclusion of the trial, he alleged that he was a “victim” of tax shelter promoters at some unidentified time, that thereafter he was repeatedly audited, that he was convicted because of misconduct by his accountant, and that his object was “civil disobedience”.
Using a “complex scheme” of trusts and multiple bank accounts to hide money for 14 years seemed like a funny form of civil disobedience to Judge Cohen:
Petitioner’s excuses are unpersuasive, and we do not believe that he acted as he did for nonfraudulent reasons. He has not presented evidence of any consultations with competent tax professionals or reliance on any legal authority for his positions. He incorporated boilerplate frivolous arguments about the Paperwork Reduction Act in his petition and alleged in his pretrial memorandum that the IRS lacks delegated authority to collect tax. Perhaps he believes that feigning lack of understanding or sincere beliefs will help him avoid the consequences of his deliberate choices. In view of his education, sophistication and success in conducting his profession and business transactions, persistence after his criminal conviction, and acknowledged “civil disobedience”, we reject any suggestion of good faith.
The Moral? If four years of prison time and $775,000 of civil fraud penalties won’t convince you that the income tax is real, you have serious issues with reality.
Cite: Goldston, T.C. Memo. 2011-9