Ioane v. Comm'r

T.C. Memo. 2009-68
UNITED STATES TAX COURT
MICHAEL SCOTT IOANE AND SHELLY JEAN OLSON-IOANE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9903-06. Filed March 26, 2009.
R determined deficiencies in Federal income tax
for Ps’ 2002 and 2003 tax years. R also determined an
addition to tax pursuant to sec. 6651(a)(1), I.R.C.,
for Ps’ 2002 tax year and accuracy-related penalties
pursuant to sec. 6662(a) for P’s 2002 and 2003 tax
years.
Held: Ps are liable for the deficiencies, addition to
tax, and accuracy-related penalties. Ps are also liable for
a penalty under sec. 6673(a)(1), I.R.C., because their
position in this case is frivolous.
Michael Scott Ioane and Shelly Jean Olson-Ioane, pro sese.
Wesley J. Wong and David W. Sorensen, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION
WHERRY, Judge: This case is before the Court on a petition
for redetermination of deficiencies concerning petitioners’ 2002
and 2003 tax years. Respondent determined that petitioners are
liable for Federal income tax deficiencies of $2,104,868 and
$457,468 for their 2002 and 2003 tax years, respectively.
Respondent also determined a $314,754.30 addition to tax pursuant
to section 6651(a)(1)1 for their 2002 tax year and accuracy-
related penalties under section 6662(a) of $420,973.60 and
$91,493.60 for their 2002 and 2003 tax years, respectively. On
brief, respondent concedes that petitioners are not liable for
unreported interest income of $1,060.26 in 2002 and $18 in 2003.
The issues remaining for decision are:
1
Unless otherwise indicated, section references are to the
Internal Revenue Code, as amended and in effect for the tax years
at issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
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1) Whether the income of various trusts2 and $140,711 in
distributions from a corporation are income to petitioners in
2002 and 2003;
2) whether petitioners are liable for self-employment tax
for 2002 and 2003;
3) whether petitioners are entitled to a $14,562 deduction
for 2002 and a $14,823 deduction for 2003, as claimed on
Schedules C, Profit or Loss From Business, for those tax years;
2
The following is a list of the “Unexplained Deposits” into
the trusts’ accounts that respondent has attributed as income to
petitioners:
Entity 2002 2003
First Amendment $2,229,987 $838,890
Publishers Trust
American Federal $1,124,357 $55,700
Trust
Charitable $1,309,482 $58,410
Scholarship
Foundation
Acacia Charitable $496,066 $106,759
Foundation
Paradise Solutions --- $19,922
Trust
Respondent also attributed to petitioners dividend income of
$15,287.90 in 2002 and $22,082.68 in 2003. Those amounts were
based on dividends deposited into accounts held by First
Amendment Publishers Trust, American Federal Trust, Charitable
Scholarship Foundation, and Acacia Charitable Foundation.
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4) whether petitioners are entitled to a deduction for a
$99,172,118 net operating loss (NOL) in 2002 and for a
$99,134,330 NOL carryover in 2003;
5) whether petitioners are entitled to itemized deductions
of $8,840 for medical and dental expenses in 2002;
6) whether petitioners are entitled to personal exemptions
of $15,000 in 2002 and $15,250 in 2003, an earned income tax
credit of $2,194 in 2003, and additional child tax credits of
$1,800 in 2002 and $1,377 in 2003;
7) whether petitioners are liable for a $314,754.30 addition
to tax under section 6651(a)(1) for 2002; and
8) whether petitioners are liable for accuracy-related
penalties under section 6662(a) of $420,973.60 for 2002 and
$91,493.60 for 2003.
FINDINGS OF FACT
At the time they filed their petition, petitioners, who are
husband and wife, resided in Nevada.
At the heart of this case are five trusts whose 2002 and
2003 income respondent has determined is attributable to
petitioners. The five trusts are (1) First Amendment Publishers
(FAP); (2) American Federal Trust (AFT); (3) Charitable
Scholarship Foundation (CSF); (4) Acacia Charitable Foundation
(ACF); and (5) Paradise Solutions Trust (PST).
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Also at issue is a corporation, Acacia Corporate Management
(ACM), from which respondent determined petitioners received
distributions in 2003. ACM was apparently incorporated in
Nevada.3
Petitioners filed joint Forms 1040, U.S. Individual Income
Tax Return, for their 2002 and 2003 tax years. The 2002 return
was prepared by “Mary R. Fuentez”.4 The 2003 return was self-
prepared. Revenue Agent Dennis Brown (Agent Brown) examined
petitioners’ 2002 and 2003 returns. Petitioners did not
cooperate with Agent Brown during the examination process, and
Agent Brown developed the case by contacting and issuing
summonses to third parties. Although Agent Brown was unable to
identify any individual checking or savings accounts petitioners
used regularly, he identified entities with which petitioners
appeared to be associated. He then summoned and received checks
and other records from financial institutions with which those
entities held accounts. He requested but never received
formation documents relating to FAP, AFT, CSF, ACF, PST, and ACM.
3
We will take judicial notice of the Nevada secretary of
state’s business records, which appear to reflect that ACM was
incorporated on Nov. 20, 2000, and was dissolved on Mar. 18,
2005.
4
Although Mr. Ioane referred to Mary Fuentez as a certified
public accountant, there is no evidence that she was one.
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Because the parties have stipulated very little, most of the
relevant facts have been gleaned from trial testimony and from
exhibits admitted into evidence at trial. Relevant facts
relating to petitioners’ relationship with each of the relevant
entities are provided below.
FAP
During or around 1998 Richard Allen Ceraolo (Mr. Ceraolo)
was introduced to Mr. Ioane, who identified himself as a trust
expert. Mr. Ceraolo and his wife, Angie (Mrs. Ceraolo),
eventually hired FAP to establish trusts and provide tax advice.
At some point, Mr. Ioane handed Mr. Ceraolo an engagement letter
addressed from FAP to Mrs. Ceraolo together with a cover letter
and an invoice both of which were dated October 19, 2000. It was
common for Mr. Ceraolo to receive correspondence from Mr. Ioane
on FAP letterhead, and Mr. Ioane referred to FAP as a trust that
Mr. Ioane had established.
Around that time, Mr. Ioane helped Jay M. Steuer (Mr.
Steuer) set up trusts for Cade Co. (a business in which Mr.
Steuer owned a 25 percent interest) and for Mr. Steuer
personally. Cade Co. funds were then channeled through FAP. Mr.
Steuer received his Cade Co. distributions through FAP and two
other trusts, North Bay Associates and Jewish Education
Foundation. Mr. Ioane handled those funds. It was Mr. Steuer’s
understanding that FAP was Mr. Ioane’s trust.
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A sampling of canceled checks5 and bank statements6 from
FAP’s accounts at (1) Saratoga National Bank (which subsequently
became part of San Jose National Bank), (2) California Federal
Bank, (3) Wells Fargo Bank, (4) Morgan Stanley, and (5) Charles
Schwab reflects that checks to Capital One, Nordstrom, Target,
Providian Financial, Merced Christian School, Stone Ridge
Christian High School, and Blue Cross of California were written
on petitioners’ behalf from those accounts.7 FAP also wrote a
check to Mr. Ioane for a “car purchase”, and Mrs. Ioane endorsed
an FAP check made payable to cash. The checks were signed using
the signature stamps of “Laurel Fierro” or “Glen Halliday”.8
5
Attached as an appendix to this opinion is a table
containing examples of checks reflecting (on a preponderance of
available evidence) payments to petitioners, by petitioners, or
on behalf of petitioners from the entities’ accounts. Some of
those checks are also mentioned in this opinion.
6
At trial, petitioners objected to the admissibility of
exhibits containing checks, account applications, signature
cards, bank statements, and deposit slips. Although we overruled
petitioners’ objections as to the checks, we reserved judgment as
to the other documents and invited the parties to brief that
issue. We overrule petitioners’ objections to those documents,
as is explained later in this opinion. See infra pp. 13-19.
7
The memo sections of the checks paid to Capital One,
Nordstrom, Target, Providian Financial, and Blue Cross of
California reflect petitioners’ account numbers and sometimes
even their names. The memo sections of the checks paid to Merced
Christian School and Stone Ridge Christian High School reflect
notations such as “IOANE / Balance of tuition due + $1.50 Nov.
ECS” and one of petitioners’ children’s names followed by
“partial payment/tuition”.
8
In addition to the fact that checks were written from FAP’s
(continued...)
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In a prior Tax Court case at docket No. 21063-04 involving
FAP, Mr. Ioane signed a “Consent to Rescind Notice of
Deficiency”, which was filed as a petition on behalf of FAP. In
that document Mr. Ioane referred to himself as “Michael S. Ioane,
general trustee For MICHAEL SCOTT IOANE, whom [sic] is the
underlying funding Source and POA for FIRST AMENDMENT
PUBLISHERS”. In addition, FAP’s address, as listed on that
petition--108 East John Street, Carson City, Nevada 89706 (East
John Street address)--is the same address petitioners listed in
their petition in this case.
Agent Brown used the bank deposits method to reconstruct
FAP’s income for 2002 and 2003. He determined that FAP had
unexplained bank deposits of $2,229,987.48 in 2002 and of
$838,889.72 in 2003. He also determined that FAP had received
$6,946.97 in dividends in 2002.9
AFT
AFT held an account with Dean Witter Reynolds, Inc.(now
Morgan Stanley). Mr. Ioane is listed as one of two grantors of
8
(...continued)
accounts for petitioners, checks payable to Mr. Ioane were
deposited into FAP’s account at Saratoga National Bank.
9
In one part of the Form 886-A, Explanation of Items,
attached to the notice of deficiency, the total dividends
received by FAP in 2002 add up to $6,947.18. This is apparently
due to a 21-cent error in the amount of dividends received from
Morgan Stanley. Respondent used the $6,946.97 figure in
computing all of the trusts’s 2002 dividend income.
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AFT on the account application. “Eric Wennerstrand” is listed as
the trustee and “Laurel Fierro and/or Judie Rogers” are listed as
the successor trustees.10 The signature card of California
Federal Bank11 for AFT listed Mr. Ioane as an authorized signer.
AFT’s signature card for its account at Saratoga National Bank
listed petitioners as trustors of AFT. Petitioners wrote checks
to FAP, CSF, and ACF from that account. Those checks were signed
by Mrs. Olson-Ioane and with the signature stamp of Jeffrey P.
Rosenberg.
On November 2, 2004, Mr. Ioane filed with the Tax Court a
“Consent to Rescind Notice of Deficiency”, which the Court
construed as a petition on AFT’s behalf and to which it assigned
docket No. 21065-04. Therein, he referred to himself as “general
trustee” and “underlying funding Source and POA for AMERICAN
FEDERAL TRUST”. He listed the East John Street address as AFT’s
address.
Agent Brown used the bank deposits method to reconstruct
AFT’s income for 2002 and 2003. He determined that AFT had
unexplained bank deposits of $1,124,356.69 in 2002 and of $55,700
in 2003. He also determined that AFT had received $2,926.71 in
dividends in 2002.
10
“Jeffrey P. Rosenberg” was also named as a trustee of AFT.
11
California Federal Bank is now a part of Citigroup.
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CSF
CSF held an account with A.G. Edwards. Mr. Ioane is listed
as CSF’s employer on the account application. A “Resolution for
Association or Other Non-Corporate Organization” associated with
that account was signed by Mr. Ioane in his capacity as
“Secretary” of CSF.
CSF also held an account with Morgan Stanley.12 In the
investment powers portion of the application for that account,
Mr. Ioane was listed as “successor trustee” of CSF. Mr. Ioane
was authorized to trade in and withdraw assets from that account.
Canceled checks from CSF’s account at Morgan Stanley reflect
payments to the Merced Christian School and Stone Ridge Christian
High School. Canceled checks from CSF’s account at A.G. Edwards
reflect payments to Merced Christian School.
Agent Brown used the bank deposits method to reconstruct
CSF’s income for 2002 and 2003. He determined that CSF had
unexplained bank deposits of $1,309,482.22 in 2002 and of $58,410
in 2003. He also determined that CSF had received $5,036.41 in
dividends in 2002 and $10,613.64 in dividends in 2003.
ACF
ACF held an account at Citibank. Petitioners both possessed
signature authority over that account. ACF also held an account
12
That account was started with Dean Witter, Inc., before it
merged with Morgan Stanley.
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at A.G. Edwards. Mr. Ioane is listed as CSF’s employer on the
account application. A “Resolution for Association or Other Non-
Corporate Organization” associated with that account was signed
by Mrs. Olson-Ioane in her capacity as “Secretary” of CSF and by
Mr. Ioane in his capacity as “President” of ACF. Petitioners
both had check-writing authority over that account. In addition,
ACF held an account with Morgan Stanley. In the application for
that account, petitioners were listed as trustees of ACF.
Petitioners were the only persons authorized to trade in that
account.
Mrs. Olson-Ioane wrote check No. 1027 dated December 8,
2003, for $1,295 payable to cash from ACF’s Citibank account.
Canceled checks Nos. 2002 and 2003 from ACF’s account at A.G.
Edwards reflect payments of $100 and $600, respectively, to
Merced Christian School and Stone Ridge Christian High School.
Petitioners both signed those checks.
Agent Brown used the bank deposits method to reconstruct
ACF’s income for 2002 and 2003. He determined that ACF had
unexplained bank deposits of $496,066.32 in 2002 and of
$106,759.12 in 2003. He also determined that ACF had received
$377.81 in dividends in 2002 and $11,469.04 in dividends in 2003.
PST
On a Schedule B, Interest and Ordinary Dividends, attached
to their 2002 joint Federal income tax return, petitioners
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reported having received $481 from PST. On a Schedule C, Profit
or Loss from Business, attached to that return petitioners
reported $40,000 in gross receipts. In a supporting statement
also attached to that return, petitioners attributed $20,000 of
those gross receipts to “MANAGEMENT FEE PST”.
On November 2, 2004, Mr. Ioane filed with the Tax Court a
“Consent to Rescind Notice of Deficiency”, which the Court
construed as a petition on PST’s behalf and to which it assigned
docket No. 21064-04. Therein, he referred to himself as “general
trustee” and “underlying funding Source and POA for PARADISE
SOLUTIONS”. He listed the East John Street address as PST’s
address.
Agent Brown’s bank deposits analysis led him to determine
that PST had unreported income of $19,922 in 2003.
ACM
ACM held an account at Wells Fargo Bank.13 A check made
payable to Mr. Ioane was deposited in that account.14 Canceled
checks reflect payments to Capital One, Target, Providian
Financial, and Blue Cross of California on petitioners’ behalf
from that account. They also reflect payments to Mr. Ioane from
13
Although Agent Brown identified a number of other accounts
held by ACM doing business as one of the five aforementioned
trusts, he treated those accounts as belonging to the relevant
trust and not to ACM.
14
That check, No. 0862982, was a $30 check from “Topics
Entertainment”.
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that account. Those checks were all signed using the signature
stamp of “Laurel Fierro”.
Agent Brown’s bank deposits analysis led him to conclude
that petitioners had $140,710.68 in distributions from ACM for
2003.
On March 1, 2006, respondent issued the aforementioned
notice of deficiency. Petitioners then filed a timely petition
with this Court. A trial was held on January 7, 10, and 18,
2008, in Reno, Nevada.
OPINION
I. Evidentiary Issues
Received into evidence at trial were a number of exhibits
consisting of checks, account applications, signature cards, bank
statements, and deposit slips pertaining to FAP, AFT, CSF, ACF,
PST, and ACM. Mr. Ioane objected to the admissibility of those
exhibits on the grounds of relevance, authentication, and
hearsay. We overruled his objections as to the checks but
reserved ruling on the admissibility of the account applications,
signature cards, bank statements, and deposit slips. As
explained below, we will now overrule his objections as to those
documents and admit them into evidence.
A. Relevance
We apply the Federal Rules of Evidence applicable in nonjury
trials in the U.S. District Court for the District of Columbia.
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Sec. 7453; Rule 143(a); see Clough v. Commissioner, 119 T.C. 183,
188 (2002).
Rule 401 of the Federal Rules Of Evidence defines “Relevant
evidence” as “evidence having any tendency to make the existence
of any fact that is of consequence to the determination of the
action more probable or less probable than it would be without
the evidence.” The account applications, signature cards, bank
statements, and deposit slips are clearly relevant to whether
FAP, AFT, CSF, ACF, and PST had unreported income in 2002 and
2003 and whether such income is attributable to petitioners. The
documents pertaining to ACM are clearly relevant to whether
petitioners received distributions from ACM in 2003.
B. Authentication
Rule 901(a) of the Federal Rules of Evidence provides that
“The requirement of authentication or identification as a
condition precedent to admissibility is satisfied by evidence
sufficient to support a finding that the matter in question is
what its proponent claims.” Rule 901(b) of the Federal Rules of
Evidence sets forth a nonexclusive list of “examples of
authentication or identification conforming with the requirements
of [Rule 901]”. Among them is subdivision (b)(4), which provides
that the authentication requirement can be satisfied by
“Appearance, contents, substance, internal patterns, or other
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distinctive characteristics, taken in conjunction with
circumstances.”
The authenticity of the disputed documents is supported by
Agent Brown’s testimony that he received them in response to
summonses issued to financial institutions with which FAP, AFT,
CSF, ACF, PST, and ACM held accounts.15 Their authenticity is
also supported by their content, analyzed in connection with the
circumstances of this case. See Alexander Dawson, Inc. v. NLRB,
586 F.2d 1300, 1302 (9th Cir. 1978) (“The content of a document,
when considered with the circumstances surrounding its discovery,
is an adequate basis for a ruling admitting it into evidence.”).
In that regard, we agree with respondent that the checks (which
have already been admitted), account applications, signature
15
Under Fed. R. Evid. 902(11), if certain conditions are
satisfied, domestic records of regularly conducted activity are
self-authenticating. To qualify, such records must be
accompanied by a written declaration of their custodian or
another qualified person.
Respondent initially offered (and, on the basis of the
attached affidavits, the Court admitted) the disputed documents
into evidence with the supporting affidavits. However, it
eventually came to light that, contrary to the Court’s initial
understanding, respondent had provided the disputed documents--
but not the attached affidavits--to petitioners before trial.
This had the effect of denying petitioners the opportunity
mandated by Fed. R. Evid. 902(11) to review and (if they desired)
challenge the documents. The Court then indicated that it
intended to reverse its initial decision to admit the evidence
under Fed. R. Evid. 902(11). Respondent withdrew the evidence
and resubmitted it without the affidavits. The disputed
documents therefore do not qualify for admission pursuant to Fed.
R. Evid. 902(11).
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cards, bank statements, and deposit slips serve to reinforce each
other’s authenticity. We therefore find that the disputed
documents bear sufficient guaranties of trustworthiness for
admissibility under rule 901 of the Federal Rules of Evidence and
overrule petitioners’ authentication objections as to the
admissibility of those documents.16
C. Hearsay
Rule 801(c) of the Federal Rules of Evidence defines
“Hearsay” as “a statement, other than one made by the declarant
while testifying at the trial or hearing, offered in evidence to
prove the truth of the matter asserted.” Hearsay is generally
excluded from evidence unless an exception applies.17 See Fed.
R. Evid. 802; Snyder v. Commissioner, 93 T.C. 529, 532 (1989).
Respondent argues on brief that the bank statements and
deposit slips “are not needed to prove the truth of any
particular deposit or other transaction from any of the
16
Although respondent argues tersely that the disputed
documents are documents relating to commercial paper under Fed.
R. Evid. 902(9), we need not rely on that proposition.
17
Fed. R. Evid. 803(6) is a hearsay exception for records of
regularly conducted activity that operates together with Fed. R.
Evid. 902(11). In fact, this Court often merges its analyses of
admissibility under those provisions. See Stang v. Commissioner,
T.C. Memo. 2005-154, affd. 202 Fed. Appx. 163 (9th Cir. 2006);
Major v. Commissioner, T.C. Memo. 2005-141, affd. 224 Fed. Appx.
686 (9th Cir. 2007); Spurlock v. Commissioner, T.C. Memo. 2003-
124. Because Fed. R. Evid. 803(6) incorporates the certification
requirement of Fed. R. Evid. 902(11), the disputed documents do
not qualify for admission under Fed. R. Evid. 803(6).
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accounts.” Instead, respondent contends that those documents
“can be admitted for non-hearsay purposes such as showing that a
trust had a particular bank account, that respondent’s
determinations in the notice of deficiency were not arbitrary and
capricious, and to provide an evidentiary foundation connecting
petitioners to the unreported income.” Respondent does not
address the account applications and the signature cards.
We agree with respondent regarding the bank statements and
the deposit slips and conclude that all of the disputed documents
(including the account statements and signature cards) are
hearsay and so cannot be admitted for the truth of their
contents, but they are admissible to establish a minimal
evidentiary foundation for the unreported income. See Avery v.
Commissioner, 574 F.2d 467, 468 (9th Cir. 1978) (affirming this
Court’s decision to admit hearsay evidence for the limited
purpose of demonstrating that the Commissioner’s determination
was not arbitrary but not as substantive proof of the amount of
the deficiency), affg. T.C. Memo. 1976-129; Costa v.
Commissioner, T.C. Memo. 1990-572 (“In establishing the necessary
evidentiary predicate, hearsay evidence may be admissible for
purposes of showing that the notice was not arbitrary,
particularly when that evidence is buttressed by other
substantive evidence”.).
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In addition, rule 807 of the Federal Rules of Evidence, a
residual exception to the hearsay rule, provides a sound basis
for admitting those documents to prove the truth of the matters
asserted therein. The core of that rule is that hearsay not
specifically covered by the exceptions in rule 803 or 804 of the
Federal Rules of Evidence is not excluded from evidence if it
bears “equivalent circumstantial guaranties of trustworthiness”.
Fed. R. Evid. 807; see United States v. Sanchez-Lima, 161 F.3d
545, 547 (9th Cir. 1998) (“Hearsay evidence sought to be admitted
under Rule 807 [of the Federal Rules of Evidence] must have
circumstantial guaranties of trustworthiness equivalent to the
listed exceptions to the hearsay rule.”).
Under rule 807 of the Federal Rules of Evidence, hearsay not
covered by the exceptions in rule 803 or 804 of the Federal Rules
of Evidence is not excluded by rule 802 of the Federal Rules of
Evidence if the Court determines that: (1) The statement is
evidence of a material fact; (2) the statement is more probative
on the point for which it is offered than any other evidence
which the proponent can procure through reasonable efforts; and
(3) the general purposes of the Federal Rules of Evidence and the
interests of justice will best be served by admitting the
statement into evidence. Rule 807 of the Federal Rules of
Evidence also requires notice to the adverse party before trial
of the proponent’s intent to offer the statement into evidence.
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We are convinced that the disputed documents possess
circumstantial guaranties of trustworthiness equivalent to those
in the other hearsay exceptions. As we have already observed,
those documents were produced by financial institutions in
response to summonses and their veracity is reinforced by other
evidence already of record. See supra pp. 6-13. As for the
other requirements of rule 807 of the Federal Rules of Evidence,
the disputed documents are material and are more probative than
any other evidence of record on the unreported income issue.
Finally, petitioners received adequate notice of respondent’s
intent to introduce the disputed documents into evidence at
trial. In fact, petitioners actually received the documents
themselves and respondent’s 27-page pretrial memorandum well in
advance of trial.18 We therefore overrule petitioners’ hearsay
objections and admit the disputed documents into evidence.19
18
The only items that petitioners did not receive before
trial were the supporting affidavits. Petitioners were certainly
on notice of respondent’s intent to offer the account
applications and signature cards into evidence at trial.
19
On brief, petitioners appear to object to the
admissibility of the copies of the checks on the basis of the
best evidence rule. Those checks are properly admissible
electronic duplicates of the paper originals and their admission
does not run afoul of the best evidence rule. Fed. R. Evid.
1003.
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II. Unreported Income
A. Burden of Proof
Section 61(a) specifies that “Except as otherwise provided”,
gross income includes “all income from whatever source
derived”. The Commissioner’s determination of a taxpayer’s
liability for an income tax deficiency is generally presumed
correct, and the taxpayer bears the burden of proving that the
determination is improper. See Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
Where unreported income is involved, the Court of Appeals
for the Ninth Circuit20 has held that the presumption of
correctness applies once the Commissioner introduces some
substantive evidence reflecting that the taxpayer received
unreported income. Hardy v. Commissioner, 181 F.3d 1002, 1004
(9th Cir. 1999), affg. T.C. Memo. 1997-97. If the Commissioner
introduces such evidence, the burden shifts to the taxpayer to
show by a preponderance of the evidence that the deficiency was
arbitrary or erroneous.21 Id. As explained below, respondent
20
Absent stipulation to the contrary, the appropriate venue
for an appeal of the decision in this case is the Court of
Appeals for the Ninth Circuit. See sec. 7482(b)(1)(A), (2).
21
Although sec. 7491(a) may shift the burden of proof to the
Commissioner in specified circumstances, petitioners have fallen
far short of satisfying the prerequisites under sec. 7491(a)(1)
and (2) for such a shift. Petitioners did not present any
credible evidence at trial, and Mr. Ioane’s testimony lacked any
semblance of credibility. In addition, petitioners did not
(continued...)
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has introduced sufficient evidence connecting petitioners with
the unreported income. Consequently, respondent’s determination
is entitled to the presumption of correctness.
B. Bank Deposits Method of Proof
Respondent used the bank deposits method of proof to
reconstruct the incomes of FAP, AFT, CSF, ACF, and PST for 2002
and 2003. Respondent also used that method to determine the
amount of distributions from ACM to petitioners in 2003.
“Deposits in a taxpayer’s bank account are prima facie evidence
of income, and the taxpayer bears the burden of showing that the
deposits were not taxable income but were derived from a
nontaxable source.” Welch v. Commissioner, 204 F.3d 1228, 1230
(9th Cir. 2000), affg. T.C. Memo. 1998-121. “The bank deposits
method assumes that all money deposited in a taxpayer’s bank
account during a given period constitutes taxable income, but the
Government must take into account any nontaxable source or
deductible expense of which it has knowledge.” Clayton v.
Commissioner, 102 T.C. 632, 645-646 (1994) (citing DiLeo v.
Commissioner, 96 T.C. 858, 868 (1991), affd. 959 F.2d 16 (2d Cir.
1992)).
Agent Brown used summonses to gather information regarding
bank and brokerage accounts held by FAP, AFT, CSF, ACF, PST, and
21
(...continued)
comply with the substantiation requirements and have been
generally uncooperative in their dealings with respondent.
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ACM. His bank deposits analysis was based largely on that
information. To avoid double-counting deposits attributable to
transfers made between accounts and to avoid counting deposits
derived from nontaxable sources, Agent Brown reduced the
entities’ taxable income for 2002 and 2003 to account for such
deposits. Documents detailing Agent Brown’s bank deposits
analysis have been admitted into evidence in this case.
Petitioners have provided no credible evidence demonstrating
error in respondent’s bank deposits analysis, choosing instead to
focus on other errors purportedly committed by respondent.
Respondent has introduced ample evidence reflecting that the
trusts had unreported income in 2002 and 2003. We now turn in
more detail to whether petitioners should be charged with that
unreported income--an issue whose outcome turns on the nature of
their relationship with those entities.
C. The Trusts as Disregarded Entities
“The legal right of a taxpayer to decrease the amount of
what otherwise would be his taxes, or altogether avoid them, by
means which the law permits, cannot be doubted.” Gregory v.
Helvering, 293 U.S. 465, 469 (1935). “However, this right does
not bestow upon the taxpayer the right to structure a paper
entity to avoid tax when that entity does not stand on the solid
foundation of economic reality.” Zmuda v. Commissioner, 79 T.C.
714, 719 (1982), affd. 731 F.2d 1417 (9th Cir. 1984). Because we
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look to substance over form, a paper entity that lacks economic
substance and is in reality a sham may be disregarded entirely
for Federal income tax purposes. See id. at 720.
We have looked to four factors in determining whether a
trust has economic substance: (1) Whether the taxpayer’s
relationship to the transferred property differed materially
before and after the trust’s creation; (2) whether the trust had
an independent trustee; (3) whether an economic interest passed
to other trust beneficiaries; and (4) whether the taxpayer
respected restrictions imposed on the trust’s operation as set
forth in the trust documents. See, e.g., Markosian v.
Commissioner, 73 T.C. 1235, 1243-1244 (1980); Lundgren v.
Commissioner, T.C. Memo. 2006-177.
Although our analysis of the four factors is made difficult
by petitioners’ lack of cooperation with Agent Brown and with the
Court’s stipulation process under Rule 91(a), the evidence before
us compels the conclusion that petitioners treated the trusts as
their personal pocketbooks, depositing and withdrawing funds at
their convenience.
1. Petitioners’ Relationship to Trust Property
Because the trust agreements underlying FAP, AFT, CSF, ACF,
and PST are not of record, it is not clear who formed the trusts
or what, if any, property was transferred into them at their
inception. The evidence does reflect that petitioners dominated
- 24 -
the trusts and that the transfer of property into the trusts did
not alter any cognizable economic relationship between
petitioners and the transferred property. See Markosian v.
Commissioner, supra at 1241. Money was frequently deposited into
the trusts’ accounts, and petitioners’ actions indicate that they
were free to do as they pleased with that money. Consequently,
this factor points to a lack of economic substance.
2. Independence of Trustees
Petitioners have not demonstrated that any of the trustees
were independent of the trusts. The trustees of CSF and ACF were
certainly not independent: Mr. Ioane was listed as successor
trustee of CSF, and petitioners were both listed as trustees of
ACF. Checks from FAP and AFT were signed using the signature
stamps of purported trustees and successor trustees, none of whom
testified at trial.22 We can infer that their testimony would
have been unfavorable to petitioners. See Wichita Terminal
Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162
F.2d 513 (10th Cir. 1947). Who was trustee of PST is even less
clear, but Mr. Ioane referred to himself as “general trustee” in
a Tax Court petition. Ultimately, petitioners have not shown
that any of the trusts had an independent trustee. Consequently,
this factor points to a lack of economic substance.
22
The AFT checks were also signed by Mrs. Olson-Ioane.
- 25 -
3. Economic Interests of Beneficiaries
Agent Brown testified that he did not know who the trust
beneficiaries were. Because the relevant trust arrangements are
not of record, that question remains unanswered.23 The evidence
reflects that petitioners treated the trusts’ accounts as their
own. Petitioners have failed to demonstrate that economic
interests flowed from the trusts to anyone other than petitioners
themselves. Consequently, this factor points to a lack of
economic substance.
4. Respect for Trust Restrictions
Petitioners had unfettered access to trust property, which
indicates that they were not restrained by trust restrictions, if
there were any, or by trust law. They paid their personal bills
and took cash from the trusts’ accounts. In addition, it appears
that at some point PST, FAP, and AFT lent petitioners unknown
sums of money.24 Petitioners have not demonstrated that those
loans were bona fide. There is no evidence of written loan
agreements, the terms of the loans, or any payments by
23
We do have a little information regarding PST and AFT.
Although Mr. Ioane’s testimony was far from credible, he
testified that PST “is actually a trust that was created probably
about 40 years ago * * * in the island of American Samoa” and
that he and his wife transferred their home to PST in 1995. He
also testified that his children “were a break-off beneficiary”
of PST and that PST was itself a beneficiary of AFT.
24
Petitioners deducted interest payments on those loans (and
other loans) on their 2002 return. Respondent has disallowed
those itemized deductions, among others.
- 26 -
petitioners. Consequently, this factor points to a lack of
economic substance.
Mrs. Olson-Ioane did not testify at trial. Mr. Ioane did
testify, but his testimony was evasive, plagued by feigned memory
lapses, and generally unbelievable. He denied controlling the
trusts and claimed to be no more than an independent contractor
working for the trusts. He characterized payments of
petitioners’ personal expenses by the trusts as loans that were
repaid, reimbursements for expenditures that he had made on the
trusts’ behalf, or payments to him in lieu of money that was owed
to him for his work.25 The evidence supports none of his
assertions.
We conclude that the trusts were mere alter egos of
petitioners that lack any semblance of economic substance.
Accordingly, we shall disregard them for Federal income tax
purposes. See Sparkman v. Commissioner, 509 F.3d 1149, 1156 n.6
(9th Cir. 2007) (“An entity without economic substance, whether a
sham partnership or a sham trust, is a sham either way and hence
is not recognized for federal tax law purposes.”), affg. T.C.
Memo. 2005-136. Petitioners are therefore liable for Federal
25
If the money was owed to him for his work, he asserts it
was treated as income on petitioners’ returns.
- 27 -
income tax on the trusts’ unexplained receipts and dividends, see
supra note 2, for 2002 and 2003.26
D. ACM
Using a bank deposits analysis, respondent determined that
petitioners received $140,710.68 in distributions from ACM in
2003. ACM’s bank records and canceled checks support
respondent’s determination, and petitioners have not demonstrated
otherwise.
Petitioners assert that ACM was the alter ego of Gerald and
Ona Lindsey. A second default judgment entered by the U.S.
Bankruptcy Court for the District of Idaho on July 30, 2004,
refers to ACM and a “Golden Opportunity Trust” as “nominees or
alter egos of Debtors Gerald and Ona Lindsey.” Petitioners
contend that “This means all of [ACM’s] income belonged to the
Lindsey’s (sic), and no one else” and that, because respondent
failed to contest the issue in bankruptcy court, respondent
“cannot now argue otherwise”.
26
Petitioners argue on brief that they cannot be held liable
for tax on the unreported income because tax on that income has
already been assessed against the trusts. They are incorrect.
Where there are two potential taxpayers, an assessment of tax on
the same income against both--a whipsaw assessment--is
permissible to protect the Commissioner’s ability to ensure
collecting the tax. See, e.g., Fayeghi v. Commissioner, 211 F.3d
504, 508 (9th Cir. 2000), affg. T.C. Memo. 1998-297; Centel
Communications Co. v. Commissioner, 920 F.2d 1335, 1339 (7th Cir.
1990), affg. 92 T.C. 612 (1989). To prohibit the tax from now
being assessed against petitioners would be to allow them to
avoid tax by hiding behind the very sham entities that were
created for tax avoidance.
- 28 -
Petitioners are wrong in all relevant respects. Whether or
not ACM is an alter ego of Gerald and Ona Lindsey has nothing to
do with whether petitioners (and petitioners’ personal expenses)
were paid out of ACM’s account in 2003. Because petitioners and
their personal expenses were paid out of ACM’s Wells Fargo
account in 2003, they are liable for tax on that unreported
income.27
III. Self-Employment Tax
Respondent determined that petitioners are liable for self-
employment tax for both years at issue. Section 1401 imposes a
tax on the self-employment income of every individual. Section
1402(b) defines “self-employment income” as an individual’s “net
earnings from self-employment”.
On brief, respondent asserts that “Petitioners earned the
income as sole proprietors, and therefore, their income is
subject to the self-employment tax.” Petitioners have provided
no evidence demonstrating that their unreported income was not
self-employment income. They are therefore liable for the self-
employment tax determined by respondent for 2002 and 2003.
IV. Schedule C Deductions
Petitioners claimed $14,562 in Schedule C deductions on
their 2002 return and $14,823 in Schedule C deductions on their
27
Petitioners have not argued (and there is no evidence
suggesting) that payments from ACM to petitioners or on
petitioners’ behalf were for some reason nontaxable.
- 29 -
2003 return. Respondent disallowed those deductions in their
entirety.
Deductions are a matter of legislative grace, and the
taxpayer must maintain adequate records to substantiate the
amounts of any deductions or credits claimed. Sec. 6001;
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); sec.
1.6001-1(a), Income Tax Regs. The taxpayer bears the burden of
proving entitlement to any claimed exemptions or deductions; the
taxpayer’s burden includes the burden of substantiation.
Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), affd. 540
F.2d 821 (5th Cir. 1976).
Section 162(a) authorizes a deduction for “all the ordinary
and necessary expenses paid or incurred during the taxable year
in carrying on any trade or business”. A trade or business
expense is ordinary for purposes of section 162 if it is normal
or customary within a particular trade, business, or industry and
is necessary if it is appropriate and helpful for the development
of the business. Commissioner v. Heininger, 320 U.S. 467, 471
(1943); Deputy v. du Pont, 308 U.S. 488, 495 (1940).
Petitioners have not submitted into evidence any records in
support of their claimed business expense deductions. In support
of those deductions, petitioners have presented Mr. Ioane’s self-
serving testimony that the records were provided to respondent’s
- 30 -
auditor “at that time” and “I believe this is accurate”.28 Mr.
Ioane also testified that the Schedule C expenses were
“accurate”. This is woefully insufficient to demonstrate
entitlement to deductions for any business expenses.
Accordingly, we conclude that petitioners are not entitled to any
Schedule C deductions for business expenses.
V. NOL and NOL Carryover Deductions
Petitioners claimed deductions for a $99,172,118 NOL in 2002
and a $99,134,330 NOL carryover in 2003. Respondent disallowed
those deductions in their entirety.
Section 172(a) allows NOL deductions. Section 172(c)
defines an NOL as “the excess of the deductions allowed by this
chapter over the gross income”, as modified by section 172(d).
“[Section] 172 provides specific rules allowing NOLs to be
carried back to preceding taxable years and carried forward to
future years to reduce a taxpayer’s taxable income.” Med James,
Inc. v. Commissioner, 121 T.C. 147, 153 n.9 (2003). A taxpayer
claiming an NOL deduction for a taxable year must file with the
28
Petitioners also argue belatedly that they cannot
substantiate their deductions because relevant records were
seized when a search warrant was executed at their house in June
2006. We do not believe that they are unable to substantiate
their deductions because respondent has the necessary evidence
and has refused to return it to them. They have no proof that
such evidence is in respondent’s possession or that respondent
has refused their request to return such evidence. There is no
evidence that they attempted to obtain any relevant records from
respondent’s Criminal Investigation Division.
- 31 -
tax return for that year a concise statement setting forth the
amount of the NOL deduction claimed and all material and
pertinent facts, including a detailed schedule showing the
computation of the NOL deduction. Sec. 1.172-1(c), Income Tax
Regs.
Petitioners claimed staggering NOLs but presented no
documentary evidence in support of those losses and appear to
have forgotten their genesis. At trial Mr. Ioane testified that
the claimed NOL resulted from a theft loss in 2001. When asked
“Can you tell us what object was stolen or was lost in a
casualty?”, he responded: “You know, I don’t recollect how that
was calculated.” When asked if he knew the object that was lost
or destroyed, Mr. Ioane responded: “No, I don’t recall any of
that information.” After the Court commented that it is hard to
believe that someone would incur such immense losses and have no
idea how, Mr Ioane asserted: “I know it related to some losses
in real estate, and promissory notes, and medical losses, and
related to medical loss.” Mr. Ioane’s testimony was evasive and
unbelievable. Petitioners have not demonstrated that they are
entitled to any NOL deductions or deductions for any other type
of loss.
VI. Itemized Deduction for Medical and Dental Expenses in 2002
Petitioners claimed an $8,840 deduction for medical and
dental expenses in 2002. Respondent disallowed that deduction.
- 32 -
Section 213(a) allows for the deduction of personal medical
and dental expenses to the extent that they exceed 7.5 percent of
adjusted gross income (AGI). Although respondent concedes that
petitioners have substantiated $3,182.82 in medical expenses for
2002, that is less than the applicable $7,850 standard deduction
for 2002. Also, in light of our earlier conclusions,
petitioners’ 2002 AGI is significantly higher than the enormous
loss that they reported on their 2002 return. This warrants an
upward adjustment of the 7.5-percent floor for deductions for
medical and dental expenses, which would in any event preclude
petitioners from deducting such expenses. Petitioners have
failed to demonstrate entitlement to an itemized deduction for
medical and dental expenses for 2002.
VII. Exemptions and Credits
Petitioners claimed a deduction of $15,000 for personal
exemptions in 2002 and a deduction of $15,250 for personal
exemptions in 2003. They claimed an earned income credit of
$2,194 in 2003. And they claimed additional child tax credits of
$1,800 and $1,377 in 2002 and 2003, respectively. Respondent
disallowed the claimed exemptions and credits.
The relevant exemptions and credits are all reduced or
phased out if a taxpayer’s AGI exceeds certain amounts. See
secs. 24(b), 32(a)(2), 151(d)(3). In light of our opinion
sustaining the deficiencies determined by respondent,
- 33 -
petitioners’ 2002 and 2003 AGI is increased to the extent that
they are ineligible for any of the claimed personal exemption
deductions or credits.
VIII. Addition to Tax and Penalties
A. Burden of Production
Under section 7491(c) the Commissioner bears the burden of
production with respect to a taxpayer’s liability for penalties
or additions to tax. This means that the Commissioner “must come
forward with sufficient evidence indicating that it is
appropriate to impose the relevant penalty.” Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). In instances where an
exception to the penalty or addition to tax is afforded, for
example, upon a showing of reasonable cause or substantial
authority, the taxpayer bears the burden of “[coming] forward
with evidence sufficient to persuade a Court that the
Commissioner’s determination is incorrect.” Id. at 447.
B. Section 6651(a)(1) Addition to Tax
Respondent determined that petitioners are liable for an
addition to tax under section 6651(a)(1) for 2002. We agree with
respondent.
Section 6651(a)(1) imposes an addition to tax of 5 percent
per month or a fraction of a month up to a maximum of 25 percent
for failure to file a timely return unless it is shown that such
failure is due to reasonable cause and not to willful neglect.
- 34 -
Petitioners argue that respondent has not met the burden of
production because respondent has not shown that they failed to
file any return. Petitioners are incorrect. In order to satisfy
the burden of production, respondent does not have to show that
petitioners failed to file any return, only that their 2002
return was filed late. Respondent has done so. The return
itself reflects that respondent received it on June 23, 2003.
That is the date on which the return is deemed to have been
filed.29 Petitioners have not introduced any evidence reflecting
that their failure to file a timely return was supported by
reasonable cause. Accordingly, we conclude that petitioners are
liable for the section 6651(a)(1) addition to tax for 2002.
C. Section 6662(a) Accuracy-Related Penalties
Section 6662(a) imposes an accuracy-related penalty on an
underpayment of tax that is equal to 20 percent of any
underpayment that is attributable to one of the causes listed in
subsection (b). Among those causes is negligence or disregard of
rules or regulations and a substantial understatement of income
tax. Sec. 6662(b)(1) and (2). Respondent contends that
petitioners are liable for the section 6662 penalty because (1)
their underpayment of income tax in 2002 and 2003 resulted from
29
Because there is no evidence that petitioners mailed that
return on or before its due date, the timely-mailed-is-timely-
filed rule in sec. 7502(a) is inapplicable. See sec. 7502(a)(2).
- 35 -
negligence and (2) they substantially understated their income
tax for both years.
Section 6662(c) defines negligence as “any failure to make a
reasonable attempt to comply with the provisions of this title”.
“[D]isregard” is defined to include “any careless, reckless, or
intentional disregard.” Id. Under caselaw, “‘Negligence is a
lack of due care or the failure to do what a reasonable and
ordinarily prudent person would do under the circumstances.’”
Freytag v. Commissioner, 89 T.C. 849, 887 (1987) (quoting
Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967),
affg. on this issue 43 T.C. 168 (1964) and T.C. Memo. 1964-299),
affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991).
There is a “substantial understatement” of an individual’s
income tax for any taxable year where the amount of the
understatement exceeds the greater of (1) 10 percent of the tax
required to be shown on the return for the taxable year or (2)
$5,000. Sec. 6662(d)(1)(A). However, the amount of the
understatement is reduced to the extent attributable to an item
(1) for which there is or was substantial authority for the
taxpayer’s treatment thereof, or (2) with respect to which the
relevant facts were adequately disclosed on the taxpayer’s return
or an attached statement and there is a reasonable basis for the
taxpayer’s treatment of the item. See sec. 6662(d)(2)(B).
- 36 -
There is an exception to the section 6662(a) penalty when a
taxpayer can demonstrate (1) reasonable cause for the
underpayment and (2) that the taxpayer acted in good faith with
respect to the underpayment. Sec. 6664(c)(1). Regulations
promulgated under section 6664(c) further provide that the
determination of reasonable cause and good faith “is made on a
case-by-case basis, taking into account all pertinent facts and
circumstances.” Sec. 1.6664-4(b)(1), Income Tax Regs.
Petitioners were negligent and substantially understated
their 2002 and 2003 Federal income tax liabilities. They used a
number of entities in order to obscure their true income, and
they claimed a nearly $100 million NOL and cannot remember why.
They have not demonstrated that any of the exceptions applies.
They are therefore liable for the section 6662 penalties
determined by respondent.
D. Section 6673(a)(1) Penalty
Section 6673(a)(1) authorizes the Tax Court to impose a
penalty not in excess of $25,000 on a taxpayer for proceedings
instituted primarily for delay or in which the taxpayer’s
position is frivolous or groundless. “A position maintained by
the taxpayer is ‘frivolous’ where it is ‘contrary to established
law and unsupported by a reasoned, colorable argument for change
in the law.’” Williams v. Commissioner, 114 T.C. 136, 144 (2000)
(quoting Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir.
- 37 -
1986)). Although respondent does not ask us to impose a penalty
upon petitioners under section 6673(a)(1), we may impose such a
penalty sua sponte. See Pierson v. Commissioner, 115 T.C. 576,
581 (2000).
Months before trial, when he was not cooperating in the
stipulation process, we warned Mr. Ioane of the possible
imposition of a section 6673 penalty.30 Undeterred, he continued
to be uncooperative in the stipulation process. His behavior
throughout these proceedings has been marked by a lack of candor.
His arguments have been nothing but frivolous and groundless. As
a consequence, we shall impose upon petitioners a $10,000 penalty
pursuant to section 6673(a)(1).
The Court has considered all of petitioners’ contentions,
arguments, requests, and statements. To the extent not discussed
herein, we conclude that they are meritless, moot, or irrelevant.
To reflect the foregoing,
Decision will be entered
under Rule 155.
30
Mrs. Olson-Ioane has not participated in person in these
proceedings in any meaningful way.
- 38 -
APPENDIX
Table: Examples of Checks Reflecting (on a Preponderance of Available Evidence) Payments
to Petitioners, by Petitioners, or on Behalf of Petitioners from the Entities’ Accounts
Account Institution Check Date Payee Amount Memo Section
Holder No.
FAP Saratoga/San 4808 02/01/2002 Capital One $1,198.69 An account number
Jose followed by
National “Michael S.
Bank Ioane”
FAP Saratoga/San 4864 02/26/2002 Merced $1,301.50 “IOANE/Balance of
Jose Christian tuition due +
National School $1.50 Nov. ECS”
Bank
FAP Saratoga/San 5032 06/14/2002 Mike Ioane $4,000 “car purchase”
Jose
National
Bank
FAP California 6006 05/13/2002 Target - $543.26 An account number
Federal Bank Retailers followed by “For:
National Shelly J. Olson”
Bank
- 39 -
FAP California 6013 05/13/2002 Capital One $466.66 “Michael S.
Federal Bank Ioane”
followed by an
account number
FAP California 6014 05/13/2002 Capital One $470.11 “Shelly J.
Federal Bank Ioane” followed
by an account
number
FAP California 6068 06/16/2002 Capital One $704.28 “Mike Ioane”
Federal Bank followed by an
account number
FAP California 6084 06/14/2002 Shelly $4,100 Signed using
Federal Bank Olson-Ioane signature stamp
of Laurel Fierro.
FAP California 6104 06/28/2002 Merced $255 The memo section
Federal Bank Christian contained the
School name of one of
petitioners’
children.
FAP California 6214 08/21/2002 Tracy Kupfer $137.74 “For: Shelly
Federal Bank Ioane + $10
postage”
- 40 -
FAP California 6219 08/23/2002 Merced $20 The memo section
Federal Bank Christian contained the
School name of one of
petitioners’
children followed
by “hot lunches-
Sept 2002”
FAP California 6263 09/06/2002 Golden Ram $850 “Mike Ioane -
Federal Bank Sportsman’s ‘Family Pack’”
Club, Inc.
FAP California 6268 09/12/2002 The Scottish $60 Renewal for a
Federal Bank Rite member number
followed by
“Michael Ioane”
FAP California 6329 10/08/2002 Blue Cross $550 A “certificate”
Federal Bank of number followed
California by “Michael S.
Ioane”
FAP California 6481 12/13/2002 Blue Cross $550 The same
Federal Bank of certificate
California number that was
on check no. 6329
- 41 -
AFT Saratoga 229 04/02/2002 The $834,000 Blank. Signed by
National Charitable Mike Ioane and
Bank Scholarship using the
Foundation signature stamp
of Jeffrey P.
Rosenberg.
CSF A.G. Edwards 2019 12/15/2003 Stone Ridge $2,356.50 Blank. Signed
Christian using signature
High School stamp of Laurel
Fierro.
ACF California 1017 11/21/2003 Morgan Hill $1,071 “Dues life”
Federal Bank Lodge signed by Mike
Ioane
ACF California 1027 12/08/2003 Cash $1,295 “$1,285- cashiers
Federal Bank check” signed by
Shelly J. Olson
ACF A.G. Edwards 2002 12/20/2002 Stone Ridge $600 Illegible.
Christian Petitioners both
High School signed the check
ACF Morgan 10516060 11/14/2002 MICHAEL $30,300.40 N/A
Stanley SCOTT IOANE
AND SHELLY
JEAN IOANE
TTEES F/T
[ACF] TRUST
DTD 1-1-93
- 42 -
ACM Wells Fargo 7962 10/21/2003 Mike Ioane $1,967 Blank. Signed
using signature
stamp of Laurel
Fierro.
ACM Wells Fargo 8037 11/19/2003 Mike Ioane $1,993.50 Blank. Signed
using signature
stamp of Laurel
Fierro.