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In Loren-Maltese v. Commissioner, T.C. Memo. 2012-214, the Tax Court introduces the legal issues as follows:
It's the facts that make this case interesting, but there are three issues of law that color its background: the general rules of tax fraud, the proper tax treatment of money taken by a politician from her campaign fund for personal use, and the effect of taking the Fifth Amendment in civil litigation.
I address the first and third issues because they are within the scope of this blog. The discussion of the requirements for fraud are probably familiar to most readers of this blog, but many may not know or fully appreciate the negative inference that may be drawn in a civil case from invoking the Fifth Amendment.
The Commissioner cut through the fog of this mass of evidence to focus on two transactions:
The Commissioner boiled down this sea of information into a very detailed analysis of two transactions: Ms. Loren-Maltese's purchase of a 1993 classic black Cadillac Allante convertible, and her investment in a luxury golf course and clubhouse. The Commissioner contends that her withdrawal of more than $350,000 from the Committeeman Fund to finance the car and investment created taxable income and that she fraudulently tried to evade the tax due on that income.
We can also draw inferences from her silence if, under the circumstances, it would've been natural for her to object. * * * *. This later principle is not constitutional, just an acknowledgment of human nature. The original Cicero made the point 2,000 years ago in his oration exposing the plot of Lucius Catilina and his friends to plunder their government's treasury. He observed that people have a natural tendency to defend their reputation, and that silence in the face of accusations suggests that there might be some merit to the charges.
View Jack Townsend's opinion in its entirety on the Federal Tax Crimes blog site.
For additional insight, explore Tax Crimes, authored by Jack Townsend and available at the LexisNexis® Store.
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