Monthly Archives: May 2020

 

In United States v. Edward J. Holland Jr. et al. No. 18-1712 (10 March 2020), Holland a songwriter, sold his song-rights to music companies, in exchange for royalty payments. Holland failed fully to report his income. 

• The IRS did not assess any additional amounts against Holland until 2003. 
• In 2005, the partnership refinanced the 1998 deal, using Royal Bank. 
• In 2012, the IRS concluded that the partnership held the royalty assets as Holland’s alter ego or fraudulent transferee and recorded a $20 million lien against the partnership.

 

 

 

We recently posted DC Determined That IRS Arbitrarily Calculated $1.5M FBAR Penalty, where we discussed that a California District Court in Margaret J. Jones v. U.S., case number 2:19-cv-04950, in the U.S. District Court for the Central District of California, determined that the IRS arbitrarily calculated a penalty of over $1.5 million for a woman who failed to file foreign bank account reports.

The $1.5 million was an arbitrary figure because it was based on her 2013 account balances instead of 2011,when she had less money in her accounts, Jones added. Had it been based on the latter, she would have owed about $37,000 less, she said. Jones moved for summary judgment to dismiss the penalty and on the charge she willfully failed to file.

We also recently posted DC Finds That FBAR Penalty Not Violate 8th Amendment & Imposed a Penalty of $12.9M Based Upon FMV on June 30, where we discussed that a Florida District Court in U.S. v. Isac Schwarzbaum, case number 9:18-cv-81147, in the US District Court for the Southern District of Florida, has determined that Schwarzbaum, will pay the IRS a $12.9 million penalty for failing to file reports on his foreign bank accounts, a federal court ordered after having determined that the agency erred when it calculated the penalty at $13.7 million or $800,000 more than the court determined to be correct.

 

 

According to Law360, in Margaret J. Jones v. U.S., case number 2:19-cv-04950, in the U.S. District Court for the Central District of California, the Court determined that the IRS arbitrarily calculated a penalty of over $1.5 million for a woman who failed to file foreign bank account reports, a California federal court has ruled, but she still must prove her failure to file the FBARs wasn't willful.

The IRS has accused Jones of flouting foreign bank account reporting requirements when she failed to report accounts in Canada and New Zealand in 2011 and 2012. The agency based its argument in part on the fact she had constructive knowledge of her duty because she signed her 2011 and 2012 tax returns even though they were prepared by her tax adviser.

The IRS penalized her $1.5 million based on amounts in her accounts in 2013, which was prorated so that half was assessed for 2011 and the other for 2012. The agency moved for summary judgment on the issue that Jones knowingly failed to file FBARs.

Jones countered that she did not properly file her FBARs because of a good-faith misunderstanding. The family's tax preparer had not told her about the requirement, she said, and she voluntarily filed FBARs once she learned of her error. The 2012 FBAR had been timely filed, she said.

The $1.5 million was an arbitrary figure because it was based on her 2013 account balances instead of 2011,when she had less money in her accounts, Jones added. Had it been based on the latter, she would have owed about $37,000 less, she said. Jones moved for summary judgment to dismiss the penalty and on the charge she willfully failed to file.

The court agreed with Jones that the $1.5 million penalty was arbitrary because it was based on her 2013 account balances instead of her balances in 2011, when she failed to file an FBAR. Jones had subsequently filed a 2012 FBAR, the court pointed out.

The court dismissed both parties' motions on Jones' willfulness. The fact she signed her tax returns created a case that, on the surface, she understood her duty to file an FBAR, which could be refuted, creating a genuine dispute that was appropriate for trial. The court said it would remand the amount of Jones' penalty to the IRS should it prove her willfulness.