Another TP misunderstands 'includes' - Christopher Salmonson

[rogfulton]

TC Memo 2014-244 contains these gems:

Attached to each Form 1040X was an affidavit by Mr. Salmonson stating:
“In * * * [the tax year] no payments or deposits were received by the party
identified as ‘the recipient’ from the party identified as ‘the payor’ which were
connected with the performance of the functions of a public office, or otherwise
constituted gains, profits or income within the meaning of the relevant law.”

Even if we were to look to the amended returns in evaluating Mr. Salmonson’s tax
liabilities, he maintains the same argument in the affidavit attached to his Form
1040X as he does in the stipulation: that the income is not taxable to him under
section 7701(a)(26) because he did not hold a public office.

Of course, the court didn't buy it:

Section 7701 [*8] provides various definitions, and section 7701(a)(26), specifically, provides
that “[t]he term ‘trade or business’ includes the performance of the functions of a
public office.” However, section 7701(c) provides that the term “includes” is not
to be interpreted to “exclude other things otherwise within the meaning of the term
defined.” We have previously held arguments seeking to convert “includes” to
“includes only” to be frivolous.17

Emphasis on includes is mine.

No sanctions though.

[Dr. Caligari]

Sounds like one of Hendrickson's Hapless Heroes.

[Famspear]

Sounds like one of Hendrickson's Hapless Heroes.

And, Judge Ronald Buch is the judge in this case -- same judge that issued the scathing analysis of Hendrickson's "Cracking the Code" scam in the Waltner case.

[Burnaby49]

We have the same issue in Canada, particularly in tax issues when taxpayers claim they are not persons under the Income Tax Act because the definition of "person" includes corporations. Therefore only corporations are persons and subject to tax. I wrote about this in the Charles Norman Holmes discussion;

At this point (I think, we were all over the map) we got down to Charlie's main argument. Here is my understanding of what he was arguing, not necessarily what he actually explicitly said. The Income Tax Act, Part I, subparagraph 2(1), states: "An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year." This is why Charlie does not want to be a person. He kept repeating that while the word "person" is in the Income Tax Act the term "human being" is not. Therefore, as a human being rather than a person, he was not subject to tax. Additionally. somewhere in the Act, it says that "a person" includes a corporation. He told the judge that this meant that only corporations were persons so if Charles Norman Holmes (that other guy) was a person then CNH was a corporation. Judge said the word "includes" implies an addition too something. Charles said the judge was wrong, the word "includes" in a definition means "includes only" so only corporations were persons and therefore subject to income tax, not human beings like charles-norman: holmes.

viewtopic.php?f=48&t=9683#p163916

[Famspear]

In this case, the Tax Court sustained the IRS adjustments to Salmonson's taxable income amounts for years 1998 through 2003. The tax deficiencies total $807,719, plus section 6651(a)(1) penalties of $194,244, plus section 6662(a) accuracy-related penalties of $161,499, for a total of $1,163,462 - plus interest, of course.

He filed returns for 1998 through 2003 on November 14, 2004 -- thus, all six returns were filed late -- hence, the section 6651(a)(1) penalties for willful failure to timely file, which of course are much steeper than the penalties for willful failure to timely pay.

[Famspear]

The Tax Court noted in passing that the IRS did not ask for the imposition of section 6673 penalties for asserting frivolous positions, and none were imposed. The Court did, however, warn Mr. Salmonson not TO DO DAT ANY MORE!

[Judge Roy Bean]

In this case, the Tax Court sustained the IRS adjustments to Salmonson's taxable income amounts for years 1998 through 2003. The tax deficiencies total $807,719, plus section 6651(a)(1) penalties of $194,244, plus section 6662(a) accuracy-related penalties of $161,499, for a total of $1,163,462 - plus interest, of course.

He filed returns for 1998 through 2003 on November 14, 2004 -- ...

Does Hendrickson's lunacy date that far back?

[JamesVincent]

In this case, the Tax Court sustained the IRS adjustments to Salmonson's taxable income amounts for years 1998 through 2003. The tax deficiencies total $807,719, plus section 6651(a)(1) penalties of $194,244, plus section 6662(a) accuracy-related penalties of $161,499, for a total of $1,163,462 - plus interest, of course.

He filed returns for 1998 through 2003 on November 14, 2004 -- ...

Does Hendrickson's lunacy date that far back?

CTC dates back to, what, '02?

[Famspear]

Yes, I believe CtC goes back to about 2002 or 2003.

The Tax Court noted in its decision that Salmonson was from Florida and was the chief executive officer of a company called Fuel Nation, Inc.

According to the Broward County, Florida Sheriff's Office, an individual named Christopher Salmonson was arrested in August 2002 "outside the headquarters of Fuel Nation, his current business venture", at Davie, Florida, and charged with 13 counts of grand theft in connection with allegedly defrauding his fellow church members at the Abundant Life Christian Centre of nearly $1.7 million.

See:

http://sheriff.org/posts/post.cfm?id=bb ... 058e275dab

According to a news report on November 20, 2008 from the Sun-Sentinel of Fort Lauderdale, Florida, an individual named Christopher Salmonson was sentenced to 20 years in prison "for swiping money that church officials [at Abundant Life Christian Centre] had hoped to use to buy 10 acres" of land for a church expansion.

See:

http://articles.sun-sentinel.com/2008-1 ... al-calabro

The Florida Department of Corrections currently shows a guest by the name of Christopher R. Salmonson, born in 1966, inmate # B06450, currently housed at the Desoto Work Camp at Tallahassee, Florida.

He is scheduled for release on October 17, 2026.

[Famspear]

From the Broward County Sheriff's Office report:

In December 1997, Christopher Salmonson asked the pastor of Abundant Life Christian Centre (ALCC) and other church administrators if they would be interested in buying the 10-acre lot adjacent to and south of the church, which is located at 1490 Banks Road in Margate. In the spring of 1998, after a payment structure was agreed upon, church administrators agreed to purchase the land. The contract, which was finalized on September 18, 1998, called for seven payments over the next two years totaling exactly $1,670.000.

The church made a final payment on February 2, 2000. In October of 2001, church administrator Eric Thomas received a letter stating that the 10-acre lot had been foreclosed on and the property had be [sic] returned to the original owner, Banks Coco, Inc. Detectives later learned that Margate Corner, Inc., - one of Salmonson’s companies - made one payment to Banks Coco than [sic] defaulted on the loan. They further learned that the bank never agreed Salmonson could sell the property to the church.

BSO [Broward County Sheriff's Office] started investigating the theft after being contacted by Abundant Life’s attorney. During BSO’s two-month long investigation, Strategic Investigations Division detectives learned that foreclosure action on Margate Corner, started about July 1998, more than two months before Abundant Life made its first payment on the land. After analyzing bank documents, detectives also learned that Salmonson converted each payment made by the church into cashier’s checks. BSO SID detectives said the cashier’s checks were either cashed at check cashing stores or made payable to other businesses owned and operated by Salmonson.

[Famspear]

From the Sun-Sentinel report:

Salmonson's swindle tore the church apart, with more than 1,000 members of the 3,400-strong congregation leaving.

Bishop Rick Thomas said the stress from the scandal caused him to have a heart attack and his brother Eric, 59, a church official, to have a fatal heart attack.

[Famspear]

In July 2012 (while in jail, of course), Salmonson filed an incoherent complaint in U.S. District Court for the Southern District of Florida, naming certain individuals including John T. Luzzo, Howard C. Forman, and various other parties, and describing himself as "Christopher Robert Salmonson, Authorized Representative, Beneficiary, Lawful Living Man, Injured Third Party Intervener."

Of course, to add a nice touch, he apparently tried to make a "Special Appearance."



Salmonson described his action as "an Admiralty or Maritime Claim."

He obviously did not want to leave out anything important.



He stated that he was being "unlawfully detained In [capitalizing the word "In"] this case as a surety on a bond...."

He states, among other things, that he had "negotiated a bond with the Clerk of the Court In [sic] the 17th Judicial Circuit [ . . .] in the amount of $50,000,000.00."

He also claimed to have "deposited with the U.S. Treasury an Indemnity Bond [ . . .] in the amount of $300,000,000.00", and on and on in a more or less repetitive fashion.

The Court dismissed the case in July 2012, stating in part:

A complaint “must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A plaintiff must articulate “enough facts to state a claim to relief that is plausible on its face.”

[ . . .]

Even liberally construed, the Plaintiff’s Complaint fails to provide anything resembling a
“short and plain” statement of the claim or the basis for the Court’s jurisdiction under Rule 8(a).1 The Plaintiff styles himself at once as a Plaintiff, a Counter-Plaintiff, and a Third-Party
Defendant in this action, and the factual allegations consist entirely of a recitation of a series of alleged financial transactions and documents purportedly delivered to the Defendants, referencing multiple exhibits not attached to the pleadings or anywhere on the record. The
Plaintiff ends this recitation with a request for the Court to take notice of the allegations, and “to ledge the account to zero and complete the settlement.” Compl. 5, ECF No. 1. Interpreted generously, the Complaint appears to request large sums of money from the various Defendants. However, even construed under the liberal standards applied to pro se complaints, the Court cannot determine the nature of the Plaintiff’s claim from the vague and confusing allegations of the Complaint. Put simply, the Complaint is frivolous and lacks a legal basis or legal merit.....

--from Order Dismissing the Complaint Without Prejudice, July 17, 2012, entry 4, Salmonson v. Luzzo, case no. 12-61392-CV-Scola/Snow, U.S. District Court for the Southern District of Florida (footnotes omitted).

[morrand]

Yes, I believe CtC goes back to about 2002 or 2003.

Worldcat lists it with a 2003 copyright date.

[Famspear]

From the Tax Court opinion:

Attached to each Form 1040X was an affidavit by Mr. Salmonson stating:
“In * * * [the tax year] no payments or deposits were received by the party
identified as ‘the recipient’ from the party identified as ‘the payor’ which were
connected with the performance of the functions of a public office, or otherwise
constituted gains, profits or income within the meaning of the relevant law.”

Did the crook use Hendrickson's "Cracking the Code" scam?

You bet!

As of the twelfth printing of Hendrickson's book, in 2010, this was still Hendrickson's advice:

I think it important to also mark a "correcting" Form 1099 with a sworn statement to the effect that, "No payments were received by the party identified hereon as "the recipient" from the party identified hereon as "the payer" which were connected with the performance of the functions of a public office, or otherwise constituted gains, profit or income within the meaning of relevant law [ . . . .]"

--from p. 177, Peter E. Hendrickson, Cracking the Code: The Fascinating Truth About Taxation in America (12th Printing, Jan. 2010).

WE HAVE YET ANOTHER WINNER!

[.]

Worldcat lists it with a 2003 copyright date.

So, assuming that to be accurate it's been in print for something in the range of 132 to 144 months. Sorta sounds like a federal sentencing guideline, doesn't it?

Between P. Hendrickson, O'Daniel, Warner, Stuart, d'Agostino, Boyd, and pending sentences for D. Hendrickson, and Back the total number of months in federal prison handed out or pending to those dumb enough to follow it has to be getting close to the number of months in print.

[AndyK]

It's important to remember that, although CtC was published on date dd/mm/yy, many of the readers-with-blinders-on filed forms 1040X "correcting" their previously-filed uneducated returns.

Thus, there are many Blowhardian Tax Court cases which include (ironic reference intended) returns which predate CtC.

[.]

Between P. Hendrickson, O'Daniel, Warner, Stuart, d'Agostino, Boyd, and pending sentences for D. Hendrickson, and Back the total number of months in federal prison handed out or pending to those dumb enough to follow it has to be getting close to the number of months in print.

Sure enough:

P. Hendrickson 27 (reduced from 33 on re-sentencing)
O'Daniel 12
Warner 37
Stuart 33
d'Agostino 21
Boyd 33

That's 163 months total, not counting the upcoming pair of add-ons. And not counting Menner for his 2nd conviction (when he supposedly was a follower) for 63 months.

He's got a ways to go to catch the record of Irwin's Federal Mafia published in '90 and in print for about 300 months:

Irwin 150
Nuen 68
Letscher 33
S. Haynes 40
K. Haynes 24
Middleton 36
Swan 108
Heath 21
Mosel 48
Pflum 30

That's 558 months, not counting Rowlee, Payne, Burdett, C. Harrison and P. Harrison, for whom I haven't found sentencing info.

At least 100 months between those 5 would be 650+ months for Irwin's efforts. Irwin's junk is out of gas, and PH's junk seems to be in the same boat. I doubt he ever catches Irwin as the all-time boob-baiter in terms of months of federal prison sentences handed out to acolytes.

[operabuff]

He filed returns for 1998 through 2003 on November 14, 2004 -- thus, all six returns were filed late -- hence, the section 6651(a)(1) penalties for willful failure to timely file, which of course are much steeper than the penalties for willful[color] failure to timely pay.

The penalties at issue were simply failure to file and failure to pay. Willfulness is an element of the criminal penalties under IRC section 7203, but not something the IRS has to prove to sustain the 6651 penalties.

This makes a huge practical difference because the IRS service centers can determine that the penalties apply simply on receipt of a late filed return or late payment. They do offer the taxpayer the opportunity to come forward with a reasonable cause explanation, but if they receive nothing or the explanation is insufficient, the penalty stays.

If the 6651 statute contained a willfulness element, the IRS would have to correspond with the taxpayer in order to determine whether the failure was willful or not. If the taxpayer didn't respond, the IRS would either have to assign a revenue agent to investigate or forgo the penalty.

[Famspear]

He filed returns for 1998 through 2003 on November 14, 2004 -- thus, all six returns were filed late -- hence, the section 6651(a)(1) penalties for willful failure to timely file, which of course are much steeper than the penalties for willful[color] failure to timely pay.

The penalties at issue were simply failure to file and failure to pay. Willfulness is an element of the criminal penalties under IRC section 7203, but not something the IRS has to prove to sustain the 6651 penalties.

This makes a huge practical difference because the IRS service centers can determine that the penalties apply simply on receipt of a late filed return or late payment. They do offer the taxpayer the opportunity to come forward with a reasonable cause explanation, but if they receive nothing or the explanation is insufficient, the penalty stays.

If the 6651 statute contained a willfulness element, the IRS would have to correspond with the taxpayer in order to determine whether the failure was willful or not. If the taxpayer didn't respond, the IRS would either have to assign a revenue agent to investigate or forgo the penalty.

I haven't researched case law (if any) on this, but I think you are right. I mis-spoke (mis-wrote) by referring to the civil penalty as a penalty for "willful" failure. In looking at the language of the statute and your comments, I think that "willfulness" is a sort of quasi-affirmative defense that the taxpayer would have to plead and prove, rather than an element that would have to be proved by the government.

In dealing with the IRS administratively, I'm used to having to request waivers of these penalties on behalf of clients. In drafting the waiver requests, I always go into an explanation of exactly what happened -- to demonstrate that the taxpayer's failure was not willful.

[fortinbras]

"Willful" means that the taxpayer made a decision not to file. As distinguished from some overbearing distraction such as missing or forgetting about filing because of some disaster, sickness, fire, etc. "Willful" does not require a fraudulent or deceitful intent, merely a decision not to file for some (any) reason.