DocketNumber: Docket No. 7602-88.
Citation Numbers: 1996 T.C. Memo. 355, 72 T.C.M. 309, 1996 Tax Ct. Memo LEXIS 356
Judges: BEGHE
Filed Date: 8/5/1996
Status: Non-Precedential
Modified Date: 4/18/2021
*356 An order will be issued denying respondent's motion for summary judgment.
MEMORANDUM OPINION
BEGHE,
The facts set forth in the Background portion of this Opinion are stated solely for the purpose of deciding the motion and are not findings of fact for this case.
On May 26, 1982, a grand jury convened in the U.S. District Court for the Southern District of New York indicted petitioner and three alleged coconspirators for various crimes. The indictment described a scheme, as summarized below, to establish fraudulent tax shelters through the creation of limited partnerships, including Caldwell Properties (Caldwell), whose funds, contributed by individual investors solicited by the defendants, were used to finance the purchase of movie rights. The tax deductions and credits to which the investor-partners thereby ostensibly became entitled were grossly inflated by the reporting of purchase prices for the movies that greatly exceeded the prices actually paid by the purchasers. To perpetrate the deception, two sets of books were maintained, one to be shown to the Government and the other accounting for what had really happened. The set of books employed to prepare partnership returns of income and reports of the partners' distributive shares of deductions and credits was knowingly*358 inflated. For some of the partnerships, not including Caldwell, checks drawn in amounts representing the inflated prices were provided to sellers of the films, who endorsed these checks and returned them to the conspirators. Thereafter, cash in lesser amounts than the face amounts of the checks was paid to the sellers in place of the checks, resulting in "skim money" to the conspirators. For other partnerships, including Caldwell, the conspirators interposed a third party, which they controlled, between the seller and the purchaser of the film and used this controlled third party to achieve a similar inflation of these partnerships' purchase prices for movies and concurrent diversion of skim money to the conspirators. For Caldwell, the interposed controlled third party was Cinepix Establishment, and the movie that was the subject of the transaction in issue was "Adios Amigos". In addition, contracts were backdated so as to allow some of the purchases to avoid the operation of a change in law providing, with effect on contracts not finalized prior to September 11, 1975, that nonrecourse notes could no longer be included in the cost of a movie for the purpose of computing losses for*359 1976 and later years.
Petitioner was the business and transactional lawyer for some of the partnerships, but respondent now concedes that he did not receive any of the skim money resulting from the inflated prices. In this respect, his position differs from that of his three coconspirators, who conceded the receipt of unreported income from skim money, and fraud additions, for some of their taxable years.
On November 8, 1982, following a 12-week jury trial in the U.S. District Court for the Southern District of New York, in which the defendants were petitioner and his three coconspirators, petitioner was convicted of (1) one count of conspiracy to defraud the United States in violation of
*361 Petitioner claims that the testimony at the criminal trial (only some of which is available to us) indicates that he was an investor in Caldwell who sublet an office to Murray Glantz, one of the coconspirators, who was the lawyer for Caldwell and who controlled the dummy general partner. Petitioner goes on to claim that Glantz did virtually everything connected with Caldwell and Cinepix, that there was no evidence that petitioner had anything at all to do with the transaction between the sellers and Cinepix, that petitioner had trouble obtaining Caldwell partnership documents from Glantz, that petitioner assisted in the sale of Caldwell interests but was not aware of the inflated purchase price, that petitioner was interested in Caldwell for its profit potential and sold it on that basis to one of the witnesses at the trial, that petitioner initiated an audit of the distributor and a lawsuit against the general partner when the profit was not paid to the partners, and that at trial the prosecutor's argument about Caldwell only referred to witnesses who did not incriminate petitioner on this point, made no effort to prove that petitioner intended to evade tax, and did not prove that*362 petitioner knew that the Caldwell deal was based on an inflated purchase price or otherwise would lead to an evasion of tax. There was evidence at trial that can reasonably be interpreted to support many of these assertions.
On January 21, 1988, respondent sent petitioners two statutory notices, one for 1974 and 1975 and the other for 1973, 1976, 1977, and 1978. 3 On April 18, 1988, petitioners timely filed their petition with this Court. 4 When petitioners filed their petition, they resided in Harrison, New York.
*363
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials.
The moving party must prove that there is no genuine issue of material fact, and all factual inferences are viewed in the light most favorable to, and all ambiguities resolved in favor of, the nonmoving party.
A motion for summary judgment necessarily implicates the burden of proof that would apply at a trial on the merits.
Respondent bases her motion on the allegedly preclusive*368 effect of petitioner's convictions under
Respondent determined that petitioner was liable for an addition to tax for fraud for 1975 under
A conviction for willful falsification under
Petitioners have presented evidence indicating that petitioner received no skim income from the sale of "Adios Amigos" to Caldwell Properties and that he may not have known about the inflated nature of the reported purchase price of the movie. He was not an attorney for Caldwell. Petitioners suggest that the jury may have convicted on the
None of the counts on which petitioner was convicted, singly or in combination, establishes that petitioner had fraudulent intent. Indeed, the judge at the criminal trial explicitly instructed the jury that it could convict on the
Respondent argues that petitioner's intent to evade tax is evidenced by the fact that he was a sophisticated lawyer and investor, that he was convicted under
We therefore deny respondent's motion for summary judgment.
For the preceding reasons,
1. Except where otherwise noted, rules referred to are the Rules of this Court, and sections referred to are sections of the Internal Revenue Code in effect in the year in question.↩
2. The charges were summarized by the court that confirmed petitioner's disbarment as a New York attorney.
3. These notices contained determinations, now conceded by respondent, that petitioner was liable for the fraud addition to tax for all 6 years from 1973 through 1978 (not just for 1975), and also that petitioner had received "profit from movie deals" (i.e., skim income) in 1975 and 1976.↩
4. Petitioners' case in this Court was consolidated with those of petitioner's coconspirators and their spouses, but those other cases have since been severed by reason of the comprehensive settlements that have been reached in them, in which, as indicated in the text,
5. Compare
Irby v. Bittick , 44 F.3d 949 ( 1995 )
Robert J. Rule v. Brine, Inc., Also Known as W.H. Brine ... , 85 F.3d 1002 ( 1996 )
Anthony Sutera v. Schering Corporation , 73 F.3d 13 ( 1995 )
united-states-v-one-parcel-of-property-located-at-15-black-ledge-drive , 897 F.2d 97 ( 1990 )
Joseph R. Dileo, Mary A. Dileo, Walter E. Mycek, Jr., ... , 959 F.2d 16 ( 1992 )
geoffrey-t-williams-v-michael-crichton-alfred-a-knopf-inc-random , 84 F.3d 581 ( 1996 )
Sierra Club Inc. v. Commissioner Internal Revenue Service , 86 F.3d 1526 ( 1996 )
Sundstrand Corporation v. Commissioner of Internal Revenue , 17 F.3d 965 ( 1994 )
Franklin Atkinson v. Denton Publishing Company , 84 F.3d 144 ( 1996 )
55-fair-emplpraccas-580-56-empl-prac-dec-p-40633-paul-rosen-v , 928 F.2d 528 ( 1991 )
american-manufacturers-mutual-insurance-company-american-motorists , 388 F.2d 272 ( 1967 )
big-apple-bmw-inc-potamkin-bmw-and-vw-inc-robert-potamkin-alan , 974 F.2d 1358 ( 1992 )
Anthony A. Calderone, Clark Hornbaker, Plaintiffs-... , 799 F.2d 254 ( 1986 )
andrew-gottlieb-and-jean-gottlieb-individually-and-as-the-natural-parents , 84 F.3d 511 ( 1996 )
Thalia Kelley Considine, and Charles Ray Considine v. ... , 683 F.2d 1285 ( 1982 )
Paragon Podiatry Laboratory, Inc. v. Klm Laboratories, Inc. , 984 F.2d 1182 ( 1993 )
United States Gypsum Company v. National Gypsum Company , 74 F.3d 1209 ( 1996 )
Baker Oil Tools, Inc. v. Geo Vann, Inc., Baker Oil Tools, ... , 828 F.2d 1558 ( 1987 )
National Presto Industries, Inc. v. The West Bend Company, ... , 76 F.3d 1185 ( 1996 )
Fidelity Bank, National Ass'n v. Avrutick , 740 F. Supp. 222 ( 1990 )