Saturday, April 17, 2021

IRS Leaves No Roger Stone Unturned—and Why His Friends Won’t Bail Him Out.

Roger Stone has a history of underpaying taxes owed to the IRS. That alone does not make him unique. Fortunately for him and many others, the Internal Revenue Code provides a detailed mechanism for making periodic payments. These are called installment agreements which include interest on unpaid amounts and may also include penalties.

Tax debts of under $10,000 qualify almost automatically for installment agreements. Liabilities above that amount usually require an agreement with the IRS that takes into account your income and other assets. When listing your assets for purposes of this kind of agreement, your statements about the property you own are done under oath. Lying about your assets or their value is sufficient to void the agreement and to make the entire amount due immediately. Where appropriate, the IRS may file a lien on your property until the tax liability is resolved.

Generally, all goes well so long as the taxpayers make the monthly payments. Miss one payment, however, and the entire agreement can be voided. That is what happened in the Roger Stone case. Complicating matters for Stone is that he was apparently not truthful about all of his assets. Through the use of what the IRS referred to as a shell company, he was able to hide some of his income and use that money bucket to support what was called a “lavish lifestyle.”

The IRS filed suit against Stone yesterday to recoup the $2 million he owes. As always, the filing of a complaint does not necessarily mean the IRS will win. But Stone has a number of serious issues here. First, the default on the installment agreement, meaning that more than $2 million is immediately due the IRS. Second, the failure to pay income tax on the amount sheltered in the sham company. Third, the fraud he committed by lying about his assets at the time he entered into the installment agreements. Fourth, the fact that this is a civil action by the IRS, meaning that the pardon he was granted by Trump does not relieve him of liability.

Stone immediately responded in the calm and measured manner with which we are all familiar. He called it: “another steaming pile of horseshit from corrupt prosecutors apoplectic about my pardon.” He may be better served by outlining a more defensible position.

Should the IRS be successful, Stone could lose everything, including real estate that he had improperly funneled into his wife’s name. Further, if the IRS fraud allegations are proven, bankruptcy will not protect him.

One possible way out is for one of Stone’s rich friends to pay the amount he owes. Even if these friends are kind and generous souls, it is extremely unlikely that they will bail him out. The reason is the rules about making a gift. Gift recipients almost never owe taxes on the amounts they receive. So far so good.

However, the maker of the gift is limited to a tax-free gift of $15,000 to any individual in any one year (subject to exceptions that include the payment of tuition). Gifts above that amount require the giver to file my favorite tax form, Form 709, the gift tax return. No actual taxes are due at the time the form is filed, but the amount of the gift reduces amount that is exempt from death taxes, currently a little more than $11.5 million per individual. This means that if I made a $2 million gift to Roger Stone to pay his taxes, I would lose a $2 million exemption on my personal estate taxes. Not. Gonna. Happen.

Perhaps Stone’s reference to horseshit is well timed. He is fairly deep in it right now.

A side note since we’re talking about taxes. Occasionally you will see a television ad about “offer and compromise,” where the IRS will settle your debt for a small percentage of what you owe. Although the ads imply that most people qualify, only a tiny percentage of cases do.

Friday, April 9, 2021

We Have Moved from “Release the Kraken” to Buzz Lightyear. Really.

There is a lot to unpack this week in the wonderful world of “release the Kraken” lawyer, Sidney Powell. The week ended with her quoting from Buzz Lightyear in a legal brief. Bear with me as we cut through the legalese while unravelling the recent developments in her cases.

Two weeks ago, Powell moved to dismiss the Dominion Voting Systems’ defamation case against her, arguing among other things that no reasonable person would accept her comments about Dominion at face value. (For more on that, see my prior article: Sidney Powell’s Defamation Defense: No Reasonable Person Would Believe My Election Rigging Claims on FOX.)

The "no reasonable person" statement did not go unnoticed by the Michigan lawyers who are attempting to get Powell sanctioned for filing frivolous post-election lawsuits there. To understand why their ears perked up, you need to know a little about writing legal briefs.

When the court allows you to file a legal brief in support of your case, two things are of utmost importance: you need to file the brief on time, and you need to include everything relevant to the case in that document.  In other words, you have one shot to do the exhaustive research necessary to make your legal case. You do not have the luxury of later saying “Oops, I missed something.” Knowing that this is a one-shot deal is what causes sleepless nights.

There is one exception to the “one shot” rule, and that is when brand new information is revealed after the brief has been filed. If you have new information, you may request that the court accept a “supplemental brief.” This is what the lawyers in the Michigan sanctions case did earlier this week.

In their supplemental brief, the Michigan lawyers said that Powell’s statements in the Dominion case effectively proved that she should be sanctioned in the Michigan case. Her “statement of facts” were, from her own admission, not facts at all. You are not entitled to file a case citing “facts” when you are actually saying “let’s see how this plays out.” In all likelihood, the judge will allow this supplemental brief to be filed. It does not portend well for Ms. Powell.

You might think that the movement in these two cases would be enough drama to last a while in the Powell world. You would be wrong. Michigan is not the only state where sanctions against Powell are being sought. She is also defending against sanctions in Wisconsin.

The argument for sanctions in Wisconsin is similar—that Powell pursued frivolous litigation. Powell’s motion to dismiss in this case is a bit different, however. She is claiming that the original Wisconsin defendants cannot claim sanctions because they waited too long to ask for them. (Technically, the court no longer has jurisdiction to hear a claim for sanctions because the case was dismissed as moot.)

What is most interesting in the Powell’s brief in support of her motion to dismiss is not the case law she cites, as questionable as that is. Rather, what has caught most commentators’ attention is her characteristic, yet extraordinary, use of hyperbole.

Most lawyers would suggest that the Wisconsin defendants simply waited too long to bring their request for sanctions. Not Powell. She argued that allowing the sanctions motion to proceed “could extend the time for filing a sanctions motion ‘to infinity and beyond’ to harass a plaintiff in what amounts to nothing more than political grandstanding.”

That’s right. Powell quoted Buzz Lightyear and even footnoted it (Buzz Lightyear, Toy Story (Pixar 1995).)

The consensus among legal analysts is that there might be more persuasive people to quote than Mr. Lightyear. If Buzz does end up being legally credible, he will probably be quoted in the reply brief as well, something along the lines of “There seems to be no sign of intelligent life anywhere.”

Monday, April 5, 2021

Trump Twitter Case Dismissed as Moot—But That's Not the Interesting Part

Today, the U.S. Supreme Court dismissed the case brought against Donald Trump for blocking people on Twitter with whom he disagreed. The decision was not unexpected. After all, (1) he is no longer president and (2) he had already been permanently barred from Twitter.

Although there was no written opinion accompanying the dismissal, Justice Thomas wrote a 12-page concurring opinion. Thomas agreed that the case should be dismissed as moot but used the opportunity to talk about what may become an issue in the future—to what extent a private company such a Twitter should be allowed to operate outside of First Amendment safeguards.

The main subject of the opinion is not what caught my eye. Rather, it was Thomas’s comment about how Trump had used his Twitter account during his presidency.

Mr. Trump often used the account to speak in his official capacity. And, as a governmental official, he chose to make the comment threads on his account publicly accessible, allowing any Twitter user—other than those whom he blocked—to respond to his posts. [Emphasis added]

This apparently throw-away comment by Justice Thomas is more important than it appears at first blush. We have already seen Trump’s Twitter comments referenced in other legal proceedings. If, as Justice Thomas suggests, these Twitter remarks were often used in an official capacity, it undermines an argument often made by Trump’s lawyers that his Twitter posts should not be taken at face value.

It has been noted in other contexts that Trump’s voluminous Twitter posts could later be problematic for him. When a conservative justice such as Thomas says that Twitter posts have credence as official statements, it gives even deeper meaning to “problematic.”