Record contained sufficient evidence to support Tax Court’s finding that plaintiffs-taxpayers underreported their income by nearly $15 million and engaged in pattern of conduct intended to defraud government, where: (1) plaintiffs engaged in scheme to shelter several million dollars of income in life-insurance policy; and (2) discovery revealed series of suspicious documents and transactions relating to plaintiffs’ finances. Moreover, Tax Court determined that trust at issue in scheme was sham lacking in economic purpose, and thus should be disregarded for tax purposes. Plaintiffs waived any argument that Commissioner was barred by statute of limitations from assessing any back taxes based on alleged 2004 sale of plaintiff’s business, where plaintiff had stipulated before Tax Court that sale of taxpayers’ business occurred in 2005. Plaintiffs similarly waived claim that IRS could not assess any tax penalty because IRS had failed to comply with section 6751(b) of Tax Code, where plaintiffs had stipulated in Tax Court that Commissioner had complied with section 6751(b). Ct. of Appeals also issued plaintiffs’ appellate counsel rule to show cause as to why he should not be sanctioned for filing frivolous appeal.
Federal 7th Circuit Court
Civil Court
Income Tax