Reynoso, Ramon: Worthy via sheer amount of loss

[KickahaOta]

Dr. Ramon Reynoso was a successful chiropractor and stock trader. Apparently quite successful, judging by the sheer volume of funds that moved through his accounts. And for eight years (1997 through 2004), he dodged paying taxes on it, by using a complicated series of trusts and bank accounts to hide (or at least obfuscate) the source of the income.

Eventually it all came crashing down, and he was criminally convicted for tax evasion, and sentenced to 24 months in prison and just over $1 million in restitution and fines.

Then came the civil tax case. That dealt with numbers that were, er, a bit larger.

I won't repeat the Tax Court opinion here. But I will make a few salient points.

His home and business were searched, and tax protestor literature was found. Tax documents were also found, at least one of which was filled out in all-zeroes tax-protestor fashion. He didn't defend himself against the deficiency with any TP or sovcit arguments, though; he went largely with the-government-ate-my-homework -- that he thought he didn't have to file (despite the fact that he did think that he'd made a rather sophisticated mark-to-market election, even though he apparently had no idea what "mark-to-market" actually meant), and that the government had stolen all the documents proving his innocence.

The Tax Court was rather unconvinced on this point. Here I will quote it:

Beneath all six of these issues is the common ground of Dr. Reynoso’s credibility. And we must find that there is not much there. Here are just some examples:
* Dr. Reynoso admitted during trial that he didn’t file his tax returns because he didn’t think he had to, but the substantial amount of tax-protester propaganda found in his home suggests otherwise.
* Dr. Reynoso claimed during trial that he didn’t bring his business records to trial because of their vastness, but Ms. Ryer, the criminal investigator, credibly testified that she never saw any records whatsoever during the search of Dr. Reynoso’s
residence. On brief Dr. Reynoso changed his story and now accuses the criminal investigators of taking and losing his
business records.
* Dr. Reynoso asserts that the misinformation on his 1099s and bank account records were mere typos. Believing this would require us to find that several insurance companies and large banks made multiple and similar typos rather than find that Dr. Reynoso submitted the incorrect information to those institutions.
* Dr. Reynoso insisted during trial that he created the T.F. Trust to protect himself, but could not offer up a single explanation as to how the trust would do so.

And finally, there is the sheer amount of the deficiency. When I add up the deficiency and penalties for the eight months -- or, rather, when I tell Excel to do it, because I can't count that high -- it comes out to exactly $404,448,492.47. FOUR HUNDRED MILLION DOLLARS. And while the order ends with "Decision will be entered under Rule 155" rather than "Decision will be entered for respondent" -- which suggests that Dr. Reynoso must have accomplished something -- I don't see any point addressed in the opinion where Dr. Reynoso actually won. OUCH.

[KickahaOta]

One other point worthy of note: in a case where the government was attempting to collect SEVERAL HUNDRED MILLION DOLLARS, Dr. Reynoso apparently elected to represent himself.

[KickahaOta]

I was morbidly curious with how this case turned out, so I went back and checked to see whether the Rule 155 calculations were complete. They were.

Despite the fact that the original notice of deficiency included several hundred million dollars in taxes and penalties, and despite the fact that Mr. Reynoso didn't seem to actually win any point at trial, something somewhere along the line was clearly way off. (Given that Mr. Reynoso apparently did a lot of stock trading, maybe this was a case of "we're going to assume that your basis for all these sales was zero until you prove otherwise.")

The final order imposes taxes and penalties somewhere around 3.1 million dollars. Chump change, really.

In January 2018, he filed another Tax Court case recontesting these tax years, and got slapped down.

ORDER OF DISMISSAL FOR LACK OF JURISDICTION
On January 9, 2018, petitioner filed the petition to commence this case, asserting that he "Never received Notice of Deficiency or Notice of Determination" for tax years 1997 through 2017. On February 9, 2018, respondent filed a Motion To Dismiss for Lack of Jurisdiction on the grounds that: (1) as to a notice of deficiency for tax years 1997, 1998, 1999, 2000, 2001, 2002, 2003, and 2004, a deficiency notice for the just-described tax years was issued to petitioner on January 9, 2009, petitioner filed a petition at Docket No. 8312-09 with respect to that deficiency notice, and a decision was entered in that case on March 22, 2017; (2) as to notice(s) of deficiency for tax years 2005 through 2017, no such notices have been issued to petitioner that would confer jurisdiction upon this Court; and (3) as to notice(s) of determination for tax years 1997 through 2017, no such notices have been issued to petitioner that would confer jurisdiction upon this Court. Although the Court directed petitioner to file an objection, if any, to respondent's motion to dismiss, petitioner has failed to do so.

The record establishes that, as to a notice of deficiency for tax years 1997 through 2004, the petition was not filed within the time prescribed by the Internal Revenue Code. Furthermore, petitioner has not produced or otherwise demonstrated that he has been issued a notice of deficiency for tax years 2005 through 2017 or a notice of determination for tax years 1997 through 2017 that would confer jurisdiction upon this Court.

Upon due consideration, it is ORDERED that respondent's Motion To Dismiss for Lack of Jurisdiction is
granted and this case is dismissed for lack of jurisdiction on the part of this Court.

[Burnaby49]

Despite the fact that the original notice of deficiency included several hundred million dollars in taxes and penalties, and despite the fact that Mr. Reynoso didn't seem to actually win any point at trial, something somewhere along the line was clearly way off. (Given that Mr. Reynoso apparently did a lot of stock trading, maybe this was a case of "we're going to assume that your basis for all these sales was zero until you prove otherwise.")

Exactly what happens in Canada. When someone sells something (say a pile of stocks) and the CRA knows the selling price but not the cost we assume the cost is zero for assessing purposes if the individual refuses to provide cost information . If the taxpayer is unhappy he can give evidence of cost to appeals or the Tax Court.

[The Observer]

And the IRS does the same when dealing with a taxpayer who has failed to declare income from trading; it is up to the taxpayer to provide evidence of the original cost of the stock/shares they sold. If they fail to do so, they will be facing a hefty tax bill.