IRS loses landmark Boulware case

[Joey Smith]

http://www.law.cornell.edu/supct/html/06-1509.ZO.html

[Imalawman]

http://www.law.cornell.edu/supct/html/06-1509.ZO.html

Very interesting. I rather thought it would go the other way.

[Dr. Caligari]

I am not surprised a bit. It is well-settled that the Government has to prove a deficiency in an evasion case. If you take money out of your corporation in a year when it earned no profits, you are withdrawing your own capital, which is nontaxable. That the taxpayer didn't act like he was taking his own capital out goes to willfulness, not to the existence of a deficiency.

In most of these cases, the corporation almost certainly did earn a profit; all that the 9th Circuit's stupid Miller rule did was make the IRS lazy about proving that fact. Going forward, I doubt they lose many cases on this ground.

[Cpt Banjo]

The fact that Boulware wasn't the sole shareholder is critical, and it would seem that the diversions amounted to embezzlement, not Section 301 distributions.

[Dr. Caligari]

...an issue which, as I read the Supreme Court's decision, may be open on remand. It may turn on whether the government properly alleged that in the indictment. In any event, as I said above, this will probably not be a big issue in future cases; the Government will just need to ask its computational witness the right questions.

[Levendis]

http://www.law.cornell.edu/supct/html/06-1509.ZO.html

Very interesting. I rather thought it would go the other way.

I follow the rule-of-thumb that says the eventual loser fares poorly at oral argument. After reading the transcript, I thought it was clear that the government would lose. The more interesting angle is the "right to tax avoidance" referenced at taxprof. http://taxprof.typepad.com/taxprof_blog ... urt-1.html

[Judge Roy Bean]

Avoidance is the soul of the committee's intent.