Paul L. Caron

Thursday, May 8, 2008

Hartman: "137 Pages of Utter Scandal"

Last week, I blogged the 137-page opinion in Hartman v. Commissioner, T.C. Memo. 2008-124 (5/1/08), in which Tax Court Judge Beghe held that IRS attorneys committed fraud on the court.  Next week's National Law journal has an article on the case, IRS Ordered to Pay Back Taxpayers $30 Million, by Marcia Coyle:

In an unusual revisiting of an earlier decision, the U.S. Tax Court recently ordered the IRS to pay back an estimated $30 million collected from taxpayers in roughly 500 settlements in a decades' old tax shelter case as a sanction for fraud committed on the court by agency attorneys.

The 137-page ruling on May 1 directed the IRS to give those taxpayers the benefit of a "secret settlement" that was the source of the fraud on the court. Under the court's order, the IRS will have to refund 64% of the tax deficiencies collected by the agency — an amount that could exceed the $30 million-estimate, according to attorneys involved in the lengthy proceedings that captured more than 1,800 cases beginning in 1985. ...

"We are protective of the integrity of our judicial process and concerned about deterrence," wrote Tax Court Judge Renato Beghe. "We are 'entitled to send a message, loud and clear.'"

Declan J. O'Donnell of Castle Rock, Colo., who is counsel to 100 of the 500 taxpayers for the past 16 years, said he and other attorneys had estimated that first Kersting group of 1300 involved $30 million plus. ...  The IRS declined to comment on the ruling or whether it would appeal.  "This is 137 pages of utter scandal," said O'Donnell. "No appeal is expected."

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