June 14, 2011
Tax Court Rejects Private Equity Manager's 'Blame the Accountant' DefenseThe Tax Court yesterday denied the request of Stephen G. Woodsum, founding managing director of Summit Partners, a private equity firm, to waive a $104,000 penalty assessed by the IRS for his failure to report on his return $3.4 million of income from the termination of a swap transaction by Deutsche Bank for which he received a Form 1099-MISC. The Tax Court forcefully rejected his attempt to escape the penalty by blaming his accountant for the underreporting. Woodsum v. Commissioner, 136 T.C. No. 29 (June 13, 2011):
Mr. Woodsum terminated the swap ahead of its set termination date because his watchful eye noted that it was not performing satisfactorily as an investment. That is, when his own receiving of income was in question, Mr. Woodsum was evidently alert and careful. But when he was signing his tax return and reporting his tax liability, his routine was so casual that a halfmillion- dollar understatement of that liability could slip between the cracks. We cannot hold that this understatement was attributable to reasonable cause and good faith.
(Hat Tip: Bob Kamman.)
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Why you shouldn't leave $3.4 million of income off your 1040 It's easy to accidentally leave a bit of income off your 1040. It even happens to preparers, especially under deadline pressure. If you have a big pile of 1099s,... [Read More]
Tracked on Jun 16, 2011 10:38:02 AM
He could have gotten away with it had he blamed TurboTax, instead.
Posted by: Woody | Jun 14, 2011 9:12:21 PM