Anger => Incoherent Verbiage

LPC
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Anger => Incoherent Verbiage

Post by LPC »

This guy is obviously so angry with what his broker did in 1991 that he has become irrational.

J. David Golub v. Commissioner, T.C. Memo. 2013-196, No. 8431-12L (8/27/2013)
Tax Court wrote:J. DAVID GOLUB,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

UNITED STATES TAX COURT

Filed August 27, 2013

J. David Golub, pro se.

Shawna A. Early, for respondent.

MEMORANDUM OPINION

LAUBER, Judge: In this collection due process (CDP) case, petitioner seeks review pursuant to section 6330(d)(1) of the determination by the Internal Revenue Service (IRS or respondent) to sustain a levy to collect petitioner's unpaid Federal income tax liability for the taxable year 2008.[1] The IRS has moved for summary judgment under Rule 121, contending that there are no disputed issues of material fact and that its action in sustaining the levy was proper as a matter of law. We agree and accordingly we will grant the motion.

BACKGROUND

A brief review of petitioner's prior litigation in this Court is necessary to an understanding of the present controversy. In Golub v. Commissioner, T.C. Memo. 1999-288, 78 T.C.M. (CCH) 367 (1999) (Golub I), petitioner challenged an income tax deficiency determined by the IRS for his 1991 taxable year. The principal issue arose from a dispute between petitioner and his brokerage house, which eventually liquidated his account by selling the securities in it. Petitioner failed to report on his 1991 tax return the capital gain realized on the sale of these securities, contending that his brokerage house had engaged in a "tortious conversion" of his account and that it, rather than he, was taxable on gains realized when the stock was sold. Golub I, 78 T.C.M. at 373. We determined that petitioner in effect was attempting to relitigate in this Court securities law claims that were subject to an arbitration proceeding in which he had refused to participate. See id. at 373, 378. We concluded that petitioner "received substantial amounts of income in 1991," that he "failed to pay tax on those amounts," and that "[h]is defense to that failure is frivolous and wholly without merit." Id. at 378. We accordingly sustained the deficiencies determined by the IRS, including additions to tax and penalties, and required petitioner to pay a $10,000 penalty under section 6673(a) for maintaining a frivolous position in this Court. Ibid.

The IRS subsequently filed a notice of Federal tax lien in an effort to collect petitioner's $267,542 tax liability for 1991. Petitioner challenged the tax lien in a CDP hearing, contending (among other things) that our judgment sustaining the IRS determination of a deficiency for 1991 was unconstitutional and should be vacated; that he had no income tax liability for 1991; and that the IRS had improperly offset his income tax refund for 2004 against his allegedly nonexistent liability for 1991. The IRS Appeals Office sustained the tax lien, and we upheld that determination. Golub v. Commissioner, Docket No. 6191-06L (order and decision dated October 21, 2008) (Golub II). We concluded that the IRS had followed all appropriate procedures in filing the notice of tax lien, and we specifically rejected petitioner's argument that the IRS had "improperly offset his income tax refund for tax year 2004 against his outstanding tax liability for tax year 1991." As we explained, section 6402 of the Code explicitly authorizes the IRS "to credit an overpayment to offset an outstanding income tax liability." Golub II, at 7.

We turn now to the current controversy, which concerns petitioner's 2008 tax year. In April 2009, petitioner timely filed Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, requesting an extension of time to file his return for 2008. On this Form 4868, petitioner reported $67,027 as an estimate of his total tax liability for 2008 and $42,027 as the total tax payments he had made for 2008. He enclosed a check for $25,000 to cover the difference.

Petitioner filed his 2008 Form 1040, U.S. Individual Income Tax Return, in October 2009 and reported tax due of $42,690. He reported total payments on line 71 of $67,317, including a $317 withholding tax credit, the $25,000 payment he had submitted with his Form 4868, and $42,000 on line 63 as "2008 estimated tax payments and amount applied from 2007 return." He accordingly claimed an overpayment of $24,627 and asked that this amount be applied to his 2009 estimated tax.

Petitioner's math did not tally with the IRS transcript of his account. The transcript showed that he had made zero estimated tax payments for 2008; the only credits recorded against his 2008 income tax liability were the $317 withholding tax credit and the $25,000 remitted with his Form 4868. Thus, when the IRS processed his 2008 return and assessed the $42,690 self-reported income tax liability, it computed a balance due of $17,373 ($42,690 - ($25,000 + $317)), excluding interest and penalties.

By May 28, 2011, petitioner's outstanding income tax liability for 2008, including interest and penalties, was $22,798. In order to collect this unpaid balance, the IRS issued petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing, and petitioner timely requested a CDP hearing. Although petitioner's position at the hearing was not entirely clear, he appeared to argue (once again) that the Tax Court decision sustaining deficiencies and penalties for 1991 was unconstitutional and should be vacated; that the IRS' application to his 1991 tax liability of overpayments and credits from other tax years was thus erroneous; and that these overpayments and credits should have been applied instead to his tax liability for 2008. Petitioner failed to provide any evidence at the hearing that he had made quarterly estimated tax payments for 2008 or that the IRS had misapplied any overpayments or credits. On March 2, 2012, the Appeals Office accordingly issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 sustaining the proposed levy. Petitioner timely sought judicial review under section 6330(d)(1).

DISCUSSION

A. Summary Judgment

The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681(1988). We may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Sundstrand, 98 T.C. at 520. However, the nonmoving party "may not rest upon mere allegations or denials" but instead "must set forth specific facts showing there is a genuine dispute." Rule 121(d); see Sundstrand, 98 T.C. at 520.

B. Standard of Review

Section 6330(d)(1) does not prescribe the standard of review that this Court shall apply in reviewing an IRS administrative determination in a CDP case. The general parameters for such review are marked out by our precedents. Where the validity of the underlying tax liability is at issue, the Court will review the Commissioner's determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where there is no dispute concerning the underlying tax liability, the Court reviews the IRS decision for abuse of discretion. Id. at 182.

There is some lack of uniformity in our precedents as to whether a de novo standard of review applies where (as appears to be true here) the controversy concerns the proper application, to the tax liability at issue in the CDP hearing, of a credit, overpayment, or remittance.[2] Because we would sustain respondent's determination in this case under either standard of review, we have no need to decide which one applies.

C. Petitioner's 2008 Tax Liability

We operate at a disadvantage in assessing petitioner's arguments because the summary judgment papers he filed, some 90 pages in toto, are devoted almost exclusively to rehashing arguments about his 1991 tax liability and the legitimacy of this Court's (long since final) decision sustaining the IRS determinations of deficiencies and penalties for that year. To discern from petitioner's papers anything relevant to the actual controversy before us is to search for needles in a haystack. However, his position appears grounded on an assertion that the IRS improperly failed to credit his 2008 account with $42,000 in payments comprising "2008 estimated tax payments and amount applied from 2007 return," as claimed on his 2008 Form 1040, line 63. Petitioner submitted no evidence, to the IRS or this Court, that he made any quarterly estimated tax payments toward his 2008 tax liability. Thus, he appears to be contending that his 2007 return showed an overpayment of $42,000 or some other amount; that he directed the IRS to apply this overpayment toward his 2008 estimated tax; and that the IRS improperly applied this overpayment instead to his (still unsatisfied) tax liability for 1991.

If this is petitioner's argument, it misses the mark. Although taxpayers generally have the right to designate the application of voluntary tax payments, see Rev. Proc. 2002-26, 2001-1 C.B. 746, this right does not extend to overpayments reported on a tax return. Section 6402(a) explicitly allows the IRS to set off any refund due a taxpayer against existing underpayments of tax for prior years. It provides: "In the case of any overpayment, the Secretary * * * may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment * * * ." The regulations provide that a taxpayer may instruct the IRS to apply an overpayment against his estimated tax for the immediately succeeding tax year. See sec. 301.6402-3(a)(5), Proced. & Admin. Regs. However, the regulations mirror the statute: They authorize the IRS to override such an instruction and apply the overpayment against "any outstanding liability for any tax." Sec. 301.6402-3(a)(6)(i), Proced. & Admin. Regs.; see N. States Power Co. v. United States, 73 F.3d 764, 767 (8th Cir. 1996) ("[Section 6402] 'plainly gives the IRS the discretion to apply overpayments to any tax liability.'" (quoting United States v. Ryan (In re Ryan), 64 F.3d 1516, 1523 (11th Cir. 1995))); Kalb v. United States, 505 F.2d 506, 509 (2d Cir. 1974) ("[Section 6402] clearly gives the IRS the discretion to apply a refund to 'any liability' of the taxpayer."); Weber v. Commissioner, 138 T.C. 348, 360-362 (2012).

Because the statute specifically permitted the IRS to apply petitioner's 2007 overpayment to his unsatisfied 1991 tax liability rather than to his 2008 estimated tax, petitioner's argument reduces to the contention that he has no 1991 tax liability because our decision sustaining the 1991 deficiencies and penalties was unconstitutional. This argument is frivolous. We accordingly grant summary judgment for respondent.

D. Sanctions

This Court now considers sua sponte whether to impose sanctions on petitioner under section 6673(a)(1), which authorizes the imposition of a penalty not in excess of $25,000 when a taxpayer has instituted or maintained proceedings primarily for delay or has taken a frivolous or groundless position in the Court. Petitioner has been amply notified about the risk of sanctions. During the administrative stage of this CDP case, the IRS warned petitioner on three separate occasions that he was advancing frivolous arguments. The Court made petitioner aware of section 6673 in Golub I by imposing a $10,000 penalty against him for advancing frivolous arguments in that case. See Golub I, 78 T.C.M. at 378. And as we noted there, two U.S. District Courts and the Court of Appeals for the Second Circuit had previously imposed sanctions against petitioner, prohibiting him from using their resources to advance frivolous attacks against his former brokerage house and other securities defendants. Ibid.

Petitioner's filings in this summary judgment proceeding consist mainly of incoherent verbiage that he has cut and pasted from previous filings in this and other courts. The only colorable legal argument we can discern from this pile of paper is the contention that the IRS erred by applying a 2007 overpayment to his 1991 liability rather than to his 2008 estimated tax. But the statute specifically allows the IRS to do this, as we informed petitioner in one of his previous cases. See Golub II, at 7 (rejecting petitioner's argument that the IRS had "improperly offset his income tax refund for tax year 2004 against his outstanding tax liability for tax year 1991" and citing section 6402(a)). At the end of the day, petitioner's position is that he has no tax liability for 1991 because the IRS and the judicial system have conspired to deprive him of his constitutional rights. That is a frivolous position that has been rejected repeatedly, and sanctions are once again appropriate.

We take petitioner at his word when he avers that he "will never cease" litigating his 1991 tax liability. He should understand, however, that this persistence will come at an ever-increasing price. We therefore impose a penalty in the amount of $15,000 under section 6673(a)(1).

We have considered all contentions and arguments that are not discussed herein, and we find them to be frivolous, without merit, or irrelevant. We have also considered petitioner's cross-motion for summary judgment. We find it wholly without merit and entirely frivolous; we therefore will deny it.

An appropriate order and decision will be entered.

FOOTNOTES

1 All statutory references are to the Internal Revenue Code (Code) in effect at the relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. All dollar amounts are rounded to the nearest dollar.

2 See Freije v. Commissioner, 125 T.C. 14, 23, 26-27 (2005); Comfort Plus Health Care, Inc. v. Commissioner, 2005-2 U.S. Tax Cas. para. 50,494 at 89,17589,176 (D. Minn. 2005) (applying abuse of discretion standard where taxpayer in CDP case challenged IRS' failure to credit overpayments). Compare Landry v. Commissioner, 116 T.C. 60, 62 (2001) (applying de novo standard where taxpayer challenged application of overpayment credits, reasoning that "the validity of the underlying tax liability, i.e., the amount unpaid after application of credits to which petitioner is entitled, [was] properly at issue"), with Kovacevich v. Commissioner, T.C. Memo. 2009-160, 98 T.C.M. (CCH) 1, 4 & n.10 (applying abuse of discretion standard where taxpayer challenged application of tax payments, reasoning that "questions about whether a particular check was properly credited to a particular taxpayer's account for a particular tax year are not challenges to his underlying tax liability"), and Orian v. Commissioner, T.C. Memo. 2010-234, 100 T.C.M. (CCH) 356, 359 (same).

END OF FOOTNOTES
Dan Evans
Foreman of the Unified Citizens' Grand Jury for Pennsylvania
(And author of the Tax Protester FAQ: evans-legal.com/dan/tpfaq.html)
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Re: Anger => Incoherent Verbiage

Post by Famspear »

The Court wrote:.....We take petitioner at his word when he avers that he "will never cease" litigating his 1991 tax liability. He should understand, however, that this persistence will come at an ever-increasing price. We therefore impose a penalty in the amount of $15,000 under section 6673(a)(1).....
And thanks for playing, Dave!

:)

:whistle:

:twisted:
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notorial dissent
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Re: Anger => Incoherent Verbiage

Post by notorial dissent »

And they keep saying stupid/pride isn't expensive!!!!
The fact that you sincerely and wholeheartedly believe that the “Law of Gravity” is unconstitutional and a violation of your sovereign rights, does not absolve you of adherence to it.
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Re: Anger => Incoherent Verbiage

Post by jcolvin2 »

Famspear wrote:
The Court wrote:.....We take petitioner at his word when he avers that he "will never cease" litigating his 1991 tax liability. He should understand, however, that this persistence will come at an ever-increasing price. We therefore impose a penalty in the amount of $15,000 under section 6673(a)(1).....
And thanks for playing, Dave!

:)

:whistle:

:twisted:
Golub continues to litigate:
https://www.ustaxcourt.gov/InternetOrde ... 7&Todays=Y
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Re: Anger => Incoherent Verbiage

Post by NYGman »

That is so Awesome on many levels to me. So if I read this right, and I did just quickly skim, but he just keeps using his 1991 amount that they made him pay when he lost his tax case as a payment towards his current year taxes. It is like the gift that keeps on giving. I wonder if CtC Pete or any of the other Gurus that have had to pay the IRS, have also tried to claim it as a credit on their next tax return. The simplicity and logic is beautiful from a Soverun' point of view. Win or lose, any payment made will just be claimed as a payment on the next return, and refunded as an overpayment. Why is this the first I have heard of this Genius idea, this can't be the first time someone has tried it when the disagreed with the imposition of a fine from a huge court Loss win.
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Re: Anger => Incoherent Verbiage

Post by The Observer »

Takes the term "paying it forward" to a whole new level of idiocy.
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Re: Anger => Incoherent Verbiage

Post by Judge Roy Bean »

Maybe he thinks (like one of my relatives does), that if you hang on long enough and just keep litigating, you and your case will outlive the judiciary, the law and even the government agency you're fighting.
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Re: Anger => Incoherent Verbiage

Post by grixit »

Judge Roy Bean wrote:Maybe he thinks (like one of my relatives does), that if you hang on long enough and just keep litigating, you and your case will outlive the judiciary, the law and even the government agency you're fighting.
Or the horse will learn to sing.
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Re: Anger => Incoherent Verbiage

Post by Jeffrey »

Where’s the beef though? :brickwall:

Okay so his brokerage liquidates his accounts resulting in capital gains which triggers $260k in tax liabilities which meant depending on how long he held those stocks he made between $900k and $1.7 million profit when the account was liquidated, in 1991 dollars.

Anyone dig through his filings to figure out why he’s mad? Thought he could have earned more if it hadn’t been liquidated or does he think he shouldn’t have to pay taxes if he didn’t sell the shares himself?
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Re: Anger => Incoherent Verbiage

Post by notorial dissent »

He was/is mad that they liquidated his holdings and created the capital gain. I have to agree that unless he actually ordered that, that he had a real issue there. I am curious as to why that happened and why they weren't held at fault. Normal preferred brokerage procedure is to either transfer the securities elsewhere, or else have them issued out in paper form, costs a bundle, but is preferable to the CG.

He was mad that he got socked for taxes that he claimed weren't his, and again I can see his point, and can sympathize with him there.

Instead of getting a good lawyer and dealing with it he went pro se and it blew up in his face, and continued to do so as he NEVER GOT THE CLUE.

If I read things correctly, he also had other tax issues along the way and so isn't exactly the purest of virgins.

My opinion, FWIW, is that he got screwed originally, and then proceeded to screw himself, repeatedly. Which doesn't alter the fact that he doesn't seem to be a very pleasant person either.
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Re: Anger => Incoherent Verbiage

Post by morrand »

notorial dissent wrote:He was/is mad that they liquidated his holdings and created the capital gain. I have to agree that unless he actually ordered that, that he had a real issue there. I am curious as to why that happened and why they weren't held at fault. Normal preferred brokerage procedure is to either transfer the securities elsewhere, or else have them issued out in paper form, costs a bundle, but is preferable to the CG.

He was mad that he got socked for taxes that he claimed weren't his, and again I can see his point, and can sympathize with him there.

Instead of getting a good lawyer and dealing with it he went pro se and it blew up in his face, and continued to do so as he NEVER GOT THE CLUE.
The story of what went down with his broker (or at least a part of it) is contained in the prior case cited, "Golub v. Commissioner, T.C. Memo. 1999-288, 78 T.C.M. (CCH) 367 (1999) (Golub I)." Mr. Golub has apparently had quite the litigious history.
FINDINGS OF FACT

The parties filed a stipulation of facts with attached exhibits. The facts reflected therein are so found, and, by this reference, are incorporated herein. Petitioner is a certified public accountant. He resided in Staten Island, New York, when the petition herein was filed.

The University of Chicago Litigation

In 1981, petitioner began filing lawsuits against the University of Chicago, IBM Corp., Ernst & Whinney, and Weiner & Co. alleging employment discrimination. In each of the proceedings, the trial court ruled against petitioner, and the U.S. Court of Appeals for the Second Circuit affirmed.

On June 5, 1989, the U.S. District Court for the Eastern District of New York ordered its Clerk not to accept future filings made by petitioner against the University of Chicago, IBM Corp., Ernst & Whinney, and Weiner & Co., unless a U.S. magistrate first granted leave. In response, petitioner filed another lawsuit naming the same defendants in the U.S. District Court for the Southern District of New York. As a result of this filing, the U.S. District Court for the Eastern District issued an order enjoining petitioner from filing further lawsuits against those defendants. It also required petitioner to pay costs in the form of defendants’ legal fees.

On January 11, 1991, the U.S. Court of Appeals for the Second Circuit affirmed the District Court’s order and imposed additional sanctions of $1,000 upon petitioner. The Court of Appeals determined that petitioner’s suit against the University of Chicago, IBM Corp., Ernst & Whinney, and Weiner & Co. totally lacked merit. The court observed:
Golub persists in filing duplicative claims that have been conclusively found to be wholly lacking in merit. He is a serial litigator whose conduct can no longer be tolerated. Although we are aware of his pro se status, we are convinced that measures must be taken to prevent Golub from continuing to file such vexatious litigation which unfairly burdens the parties he names as defendants and the courts.

In addition to affirming the district court’s award of attorney’s fees, we believe that the imposition of sanctions is warranted to deter Golub from continuing his attempts to harass. * * *

Accordingly, we conclude that the imposition of damages in the amount of one thousand dollars ($1,000) is appropriate. Additionally, the Clerk of this Court is directed not to accept any future filings by Golub, except for filings seeking further review of our decision herein, until the sanctions awarded by the district court are satisfied in full. This disposition should serve as a clear and unambiguous message to Golub that the courts are not to be used as vehicles for harassment.
So he got off to a bad start with the district courts. That doesn't answer your question about how he managed to get screwed by his broker. The court's getting to that.
The Kidder Peabody Litigation

By 1981, approximately the time he instituted the litigation discussed above, petitioner had opened a brokerage account with Kidder, Peabody & Co., Inc. (Kidder Peabody). He also entered into an agreement with Kidder Peabody enabling him to deal in “put” and “call” options. Kidder Peabody agreed to extend credit to petitioner, enabling him to trade on margin. Pursuant to a “Customer’s Agreement”, petitioner agreed that Kidder Peabody could hold the assets in his account as security for all liabilities that petitioner owed to Kidder Peabody. Under the agreement, Kidder Peabody had “the right at any time without notice to apply any cash or credits” in petitioner’s account “to payment of any * * * debit balances or other obligations” of petitioner.

In 1986 or 1987, petitioner began to complain that Kidder Peabody had engaged in unauthorized trades in his account. On March 20, 1987, George C. Cabell, vice president and associate general counsel of Kidder Peabody, wrote to petitioner and explained:
What has occurred is that you have failed to respond to margin maintenance calls made in connection with positions in your account with the result that positions in the account had to be liquidated to satisfy the maintenance calls. * * *
The letter concluded: “We do not feel that we can consent to act on your behalf in the future in connection with this account, and we respectfully request that you transfer your account to another firm.”

In reply, petitioner made a handwritten notation on a copy of Mr. Cabell’s letter to him, stating: “Your statement of the facts of this case is not correct. As a result, I believe it is necessary for us to meet to discuss the ‘exact’ nature of my claims.” Petitioner then wrote the following letter to Mr. Cabell:
May 12, 1987

Dear Mr. Cabell:

Your failure to respond to my request for an appointment to reconcile the facts and issues with respect to my account will only tarnish your defense to support your position before any impartial tribunal. In essence your solution is to create a “FORCED” LIQUIDATION where I must sell out securities regardless of the market timing. Also, by forcing me to transfer this account to another Wall Street House, you believe that you can sweep all of your past improprieties under the rug with supposedly no trace left for public scrutiny. The Churning transactions effectuated by your salesmen are a matter of record. CASE IN POINT: I have documented all short positions (PUT TRANSACTIONS) sold and written in my account on a trade date basis where the WALL STREET JOURNAL and NEW YORK TIMES FINANCIAL PAGES listed an S or R. Obviously, in such a case the purchaser had to be KIDDER, PEABODY as principal. Shortly, thereafter, I was put stock where the expiration period was greater than six months and there was a less than 10% decline in the security price from the trade date market price. Who put the stock in my account and for what reason? What other explanation? Why is KIDDER, PEABODY acting as an UNDISCLOSED PRINCIPAL? In February, 1987, I called Paul Tierny and requested that I be permitted to sell COVERED CALL OPTIONS as a start to liquidating my account. He refused. Yet you have the * * * audacity to continue to charge me margin interest and at the same time create a situation where you tie my hands and force liquidation? What securities laws do you follow as general counsel for KIDDER, PEABODY? Do you wish to test my allegations in a court of law? Don’t you guys have enough garbage from the SIEGEL-BOESKY AFFAIR?

Once again I am requesting a meeting with you and whoever else at KIDDER, PEABODY has the authority to make the necessary adjustments to correct the wrongs. I can be reached at the number cited above.

RESPECTFULLY,
J.D. GOLUB
On May 19, 1987, Kidder Peabody’s vice president, Paul T. Tierney, responded:
I am in receipt of your letter to George Cabell dated May 12, 1987.

Our position remains the same, as we stated at previous meetings. In addition, we again ask you to give us the name of a broker to transfer your account to as you said you would months ago.
During 1987 and 1988, petitioner continued his complaints against Kidder Peabody, insisting that Kidder Peabody had ignored his order to close his account and that Kidder Peabody had instead taken it over for its own purposes.
Summarizing, these included complaints to the NASD, the CBOE, and the AG of NY. When none of them elected to take action, he took his complaints to the district court, which promptly kicked the matter over to arbitration, of which Mr. Golub wanted no part. It took him until sometime in late November, 1991, and a fair number of pleas from counsel for Kidder Peabody, for him to finally write:
CONSIDER THIS LETTER TO BE THE FORMAL AUTHORIZATION [to liquidate the account] YOU REQUEST. ALL PRIOR LETTERS ARE INCORPORATED BY REFERENCE. (YOUR STATEMENT ABOUT RESPONSIBILITY FOR ALLEGED PRESENT RECALCITRANCE IS IRRELEVANT). I REINSTATE MY DEMAND FOR THE IMMEDIATE RELEASE OF ALL SEIZED MONIES IN THE KIDDER, PEABODY & CO., INC. BROKERAGE ACCOUNT.

NOTHING IN THIS LETTER OF DEMAND IS TO BE CONSTRUED AS SETTLEMENT OF THIS LITIGATION IN ANY FORM, MANNER OR CONTEXT.
So they did. Meanwhile, Mr. Golub continued to file motions and appeals in the federal courts until they finally told him to cut it out until he'd finished arbitrating. Which, of course, he wouldn't do.

Anyway, by December, 1991, Mr. Golub's account was reported to have earned $698.85 in interest, $15,882.21 in dividends, and $458.41 in "proceeds from miscellaneous sales of securities." His balance was $(141,400.64). Liquidating his account brought $387,686.49, and he wound up receiving a number of checks for the balance totaling just shy of a quarter million dollars. This is where his tax woes began.
On his Federal income tax return for 1991, petitioner failed to report the dividend income from his account with Kidder Peabody. On Schedule B of the return, where interest income from Kidder Peabody should have been reported, petitioner wrote in the word “LITIGATION”. On Schedule D of his return, in the space for reporting long-term capital gains, petitioner wrote “NONE”. On the parts of the schedule reserved for identifying the transactions, he wrote, “Kidder Peabody & Co. Acct—Litigation—Partial Payment—Received Escrowed—Interest Bearing Acct”.

Petitioner’s 1991 return contained a Schedule C for reporting profits or losses from business. On that form, petitioner identified his principal business as real estate appraisal and financing. He reported income of $790 (in the form of interest) and expenses of $28,522. The expenses included “other expenses” of $10,000 for “Telephone, Litigation-Reputation, Professional Dues, Library-Law Publications”. Petitioner also claimed a net operating loss carryover deduction of $11,439.
He pulled a similar stunt on his 1992 Schedule C, and also failed to report a New York state tax refund. Unsurprisingly, these shenanigans ultimately led to Tax Court, where he...well, actually, continued to pull shenanigans:
In preparing for trial, respondent repeatedly wrote to petitioner, asking for records that would demonstrate his bases in the securities that had been held in the Kidder Peabody account and for records that would substantiate his deductions. Such records were not forthcoming. Nor did petitioner participate meaningfully in developing the case for trial. He delayed in meeting with respondent concerning the stipulation process and ultimately contributed efforts that were, at best, negligible. All evidentiary documents contained in the stipulation were obtained by respondent from either Kidder Peabody or the U.S. District Court for the Southern District of New York.

Approximately 1 week before the trial date, petitioner filed a motion for continuance, asserting that respondent had failed to comply with the standing pretrial order. Respondent countered with a motion to dismiss for lack of prosecution. Three days before trial, petitioner filed a notice indicating that all the defendants in the University of Chicago litigation and in the Kidder Peabody litigation would be subject to subpoena in petitioner’s case before this Court. The Court set a hearing to consider these motions.

At that hearing, the Court inquired of petitioner what the University of Chicago had to do with the case at issue. Petitioner responded:
Because the University of Chicago conspired with two other employers to discharge me, and then after those discharges, I was originally hired by Kidder, Peabody as an employee and then was told, like, that I couldn’t be an employee, and I should become an independent contractor with them.

That was basically done because there was pending litigation against those other employers, past dischargers, and the University of Chicago, who had intentionally withheld the issuance of a degree at that point and conspired with those employers to terminate me.

This is all related. There is no absolute, rational basis for holding a person’s assets the way they [i.e., Kidder Peabody] did * * *
We denied both petitioner’s motion for a continuance and respondent’s motion to dismiss.
Mr. Golub then went on to screw around in the Tax Court some more (including 18 post-trial motions). The court was not impressed.
We reject petitioner’s contention that Kidder Peabody engaged in a “tortious conversion” of his account by refusing his directions in 1987 to close the account. Petitioner argues that Kidder Peabody, having exercised control over his property, became the owner of that property and is taxable on the gains realized when it was sold. He concludes that his receipt of the net sale proceeds was not the receipt of taxable income but rather “a partial restitution by tortfeasor”.

Petitioner is in effect seeking to relitigate in this forum his claims that Kidder Peabody improperly handled his account. These are claims that the District Court ordered the parties to arbitrate, but petitioner has failed to comply with that order. Petitioner apparently is displeased with the results he obtained in District Court. Therefore, having made appeals, and otherwise sought reconsideration, of the District Court’s order until enjoined from any further filings, petitioner now seeks to bring Kidder Peabody (as a “hostile witness”) into this Court. Petitioner, however, has already had ample opportunity to
demonstrate the alleged tortious conversion, but, because he refuses to obey the District Court’s order, he has failed to do so.
And of course, for all his fooling around in the court, he never quite got around to explaining his basis in his account, with tragic consequences.
...Petitioner is taxable both on the $246,976.40 that he received and on the portion of the sale proceeds retained by Kidder Peabody.

Petitioner also had the burden of proving how much gain or loss he realized on the sale of stock owned by him; such proof requires that he establish his basis in the stock. See sec. 1012; Hall v. Commissioner, 92 T.C. 1027, 1038 (1989); sec. 1.1012-1(c), Income Tax Regs. Petitioner is a certified public accountant, and the record shows that he is aware that gain on the sale of stock represents the amount received over the basis. See sec. 1001(a).

Despite repeated invitations by respondent and by the Court to prove his basis in the stock sold, petitioner has failed to do so. He has left the Court with no choice but to hold him liable on all the proceeds from the sale of the stock. See Rockwell v. Commissioner, 512 F.2d 882, 887 (9th Cir. 1975), affg. T.C. Memo. 1972-133. Petitioner thus may end up paying more in capital gains taxes than he would have if he had provided evidence of basis. But if so, he has only himself to blame.
The decision goes on and on, knocking down his Schedules C and many other of Mr. Golub's arguments, and to top it off, imposing both accuracy (sect. 6662(a)) penalties and a $10,000 frivolous-proceeding sanction. So, he clearly did not come out of that a winner.

But, hey, if at first you don't succeed....
---
Morrand
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Re: Anger => Incoherent Verbiage

Post by notorial dissent »

As I said, his own worst enemy, and definitely doesn't sound like a nice person. It does sound like he brought it on himself though. If he was trading in puts and calls I'm actually surprised he had anything left to liquidate. If you're going to play that kind of Russian roulette you need a fair amount of liquidity to cover it, and it doesn't sound like he did. It does sound like he got himself in margin trouble, which is common with those types of trades, and that was the start of it. Not the sort of client I'd want to have to deal with.
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Re: Anger => Incoherent Verbiage

Post by grixit »

Churning is a real abuse that has led to tightened regulations since the 80s. But considering his balance increased, i'd say he didn't suffer all that much from it. It looks as if he just got into a bad mood early on and refused to let go of it.
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Re: Anger => Incoherent Verbiage

Post by notorial dissent »

There is a lot of odd involved here, but he also sounds like the type that litigates every little thing.
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Re: Anger => Incoherent Verbiage

Post by Jeffrey »

Doesn't sound like churning based on Morrand's summary, guy exceeded the credit margin for options trades then got snooty about it.
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Re: Anger => Incoherent Verbiage

Post by . »

Funny stuff.

Since the beginning of time, when you open any brokerage account you agree that the broker can liquidate that account including all open positions for any reason, without notice. The usual reason is that you don't have enough equity in the account, but they could do it if they're just feeling nervous about anything.

Otherwise known as a margin call. In the old days -- the '60s, '70s and '80s, they used to mail them out or call you and you had a few days or a few hours to meet it. Since then, it's all gone electronic and your positions will be sold out as necessary to keep your account within margin requirements. Automatically, no human intervention required. All entirely legal.

His mistake was putting stuff he had big gains on into his account to back up his speculation. When his spec positions went against him the broker rightfully sold whatever was available to raise cash and keep his account adequately margined and prevent the possibility of his account going below zero equity.

Exactly what any broker would do.

This guy is a CPA, but I wouldn't have him do a tax return for my dog.
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Re: Anger => Incoherent Verbiage

Post by notorial dissent »

The margin agreement/margin call is really a whole other kettle of fish. You sign one of those and you pretty much pledge your life, as well as everything in your account. In theory the securities or cash in the account have to meet a certain level to cover the margin, if it doesn't they cut off your credit and ask for more money, NOW!!! Basically margin is a loan from the brokerage to you against the value of your securities. If the market is good, and the securities are good, that can give you a lot of leeway. Conversely if the market takes a hit, you could be in a world of hurt and get a margin call you can't meet except by selling the securities and that can trigger the capital gains. Basically you get busted twice.
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Re: Anger => Incoherent Verbiage

Post by Jeffrey »

Quite a few horror stories out there about buying options on margin in the last ten years. If the average investor wasn’t aware of the dangers involved before the market crash, they should be by now. I think e-trade actually specifically states in their terms and conditions for those types of trades that you can lose more than the total value of your account through margin trades.
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Re: Anger => Incoherent Verbiage

Post by notorial dissent »

As I said previously, that kind of trading, unless you're really really good, and lucky, is the equivalent of playing Russian Roulette with a fully loaded pistol.
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Re: Anger => Incoherent Verbiage

Post by . »

Well, guys, I have to disagree.

Notarial: A "margin agreement" isn't a different kettle of fish. EVERY account agreement written in the last 50 years covers the broker's right to liquidate anything in the account if they feel insecure for any reason and covers broker loans to the customer and the terms and margin requirements, whether the customer ever has any loan or not.

Jeffrey: There aren't many horror stories about "buying options on margin" -- buying an option (put or call) limits your risk to the premium paid for the option. Selling (writing) call options is what exposes one to potentially unlimited risk and margin calls, writing puts exposes you to the entire price of the underlying security.

The only way someone gets into trouble buying options is if their options expire worthless (about 95% of them do because you have to be right about time-frame and direction and extent) AND at the same time the underlying stock(s) borrowed against to buy the options declines significantly, causing a maintenance margin call because of the loan against the collateral used to buy the options. Not unheard of, but pretty rare.

As I said: "His mistake was putting stuff he had big gains on into his account to back up his speculation. When his spec positions went against him the broker rightfully sold whatever was available to raise cash and keep his account adequately margined and prevent the possibility of his account going below zero equity."

I'll add that selling him out to meet margin calls (if you fall $1 under maintenance it'll happen instantly) was all done electronically in milliseconds without human intervention.
All the States incorporated daughter corporations for transaction of business in the 1960s or so. - Some voice in Van Pelt's head, circa 2006.