Tax Roundup, 1/9/2014: She stole from me! And gave it to my kids! And: $10 pizza and tax show!

January 9th, 2014 by Joe Kristan

20120511-2It’s a rare thief that applies her ill-gotten gains to pay for college for the victim’s children.  But a Texan filed a tax return claiming just that, and it ended up in a Tax Court case decided yesterday.

The taxpayer divorced Wife #1 in March 2005, marrying Wife #2 in May 2005.  The second marriage went downhill quickly, with ending in an August 8 2006 divorce.

In the summer of 2006, the taxpayer asked Wife #1 to help him with some personal issues, including an alcohol problem and financial issues arising from the divorce.  Somewhere along the way, $120,000 was transferred to Uniform Transfers to Minors Act account for the children of the marriage to Wife #1 under signature authority granted by the taxpayer to Wife #1.  Judge Cohen explains:

Petitioner expressed to [Wife #1] that he intended that the money be used for expenses related to their children’s education. During this conversation, petitioner also discussed his upcoming divorce from [Wife #2]. Petitioner suggested to [Wife #1], and later represented to an Internal Revenue Service agent, that he wanted to preclude {Wife #2’s] access to the funds.

The funds ended up being spent on for their kids’ schooling, but eventually the taxpayer had other needs:

In September 2008, petitioner was having financial difficulties. He attempted to obtain funds from the accounts that [Wife #1] had set up. He advised [Wife #1} that the $120,000 transferred to her in 2006 should have been put in revocable trusts rather than in the childrens’ educational accounts.
 On June 19, 2009, petitioner filed a civil lawsuit against [Wife #1] related to the $120,000 transferred to the UTMA and section 529 accounts for their children and other matters. [Wife #1] asserted counterclaims in the lawsuit. In early 2010, the parties to the lawsuit entered into a settlement agreement. In the settlement agreement, petitioner and [Wife #1] acknowledged that the education accounts were the property of their children. [Wife #1] agreed to provide to petitioner biannual financial information related to the UTMA accounts. Petitioner and [Wife #1] released all claims against each other in the settlement agreement.

The judge weighed the word of the two spouses, and came down on the side of the one who hadn’t been to rehab:

We understand that former spouses are not objective witnesses in many instances, but we must reach a decision based on which version is more probable and which party has the burden of proof. In this instance, considering primarily the passage of time between the transaction and petitioner’s expressions of disagreement with [Wife #1]‘s handling of the transaction and the absence of contemporaneous corroboration of petitioner’s intentions, we conclude that the burden of proof has not shifted and that petitioner has not proven that a theft occurred.

The Moral?  It isn’t considered standard financial procedure to give your ex-spouse signature authority over your finances.  If you do, you should probably document it very carefully.  If you don’t like the results, it might be hard to convince the IRS and a judge that you’ve been wronged.

Cite: West, T.C. Memo 2014-2.

 

Iowa Businesses!  The deadline for claiming the commercial property tax credit enacted last year is January 15!  Details at the Iowa Department of Revenue.

 

TaxGrrrl, Filing Your Taxes Early? IRS Will Not Process Returns Before Opening Day.  And don’t try to file until you have your W-2s and 1099s.

William Perez, Requesting Form W-9 from Independent Contractors

Robert D. Flach ponders A VOLUNTARY RTRP DESIGNATION!  I don’t care for the idea, for the reasons Jason Dinesen explains, but would be fine with preparers banding together to develop their own privately-administered standards.  I have no faith in the IRS doing so fairly or effectively.

Scott Hodge, The Number of Millionaire Tax Returns Fluctuates Every Year (Tax Policy Blog)

million-dollar filers

And the population of the million-dollar filers turns over a lot.

Cara Griffith, The Recurring Question of Corporate Disclosure (Tax Analysts Blog):

My general objection to requiring the disclosure of corporate tax return information is that it seems unnecessary. State tax authorities and economic development commissions are already receiving a substantial amount of information about corporate taxpayers. They have the ability to do any type of analysis they choose. Given that the information is already available to those who can properly analyze it, why is it necessary to make it public?

Why not instead develop a database of which tax incentives are available, who has received them, and the benefits they provide? 

Excellent idea.

Tax Justice Blog, Will Basic Constitutional Rights Be the Next Casualty of Kansas’ Supply-Side Experiment?  Hard to see where that happens in this post.

Kay Bell, LBJ’s war on poverty, aided by the Earned Income Tax Credit.  Too bad 20-25% of it gets stolen or misapplied.

EITC error chart

TaxProf, The IRS Scandal, Day 245

 

Des Moinesiacs, listen up!  From Kathryn Smith at IMA:

Please join us for the annual ICN broadcast sponsored by the North Central Regional Council of Institute of Management Accountants on January 9, 2014.  Our speaker will Joe Kristan.  Mr. Kristan will be presenting the 2013 Income Tax Update.  If you have not heard Joe before you are in for a treat.  Joe mixes a little humor with a rather dry subject.  We will start broadcasting at 6:00 p.m. and be joined by locations in Dubuque, Cedar Falls, Cedar Rapids, Grinnell and Davenport.  This is one meeting you won’t want to miss.  Join the Des Moines Chapter at 5:30 p.m. for pizza and pop.  Cost is $10.

It’s at Iowa Public Television, 6450 Corporate Drive, Johnston.  And rest assured, if you do this stuff for a living, it’s not a dry subject!

Career Corner: I’ll Take “Things That Are Worse Than Failing The CPA Exam” For $500, Alex (Going Concern)

 

Share

Tags: , , , , , , , ,