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7th Circuit upholds tax, fraud conviction against attorney, wife

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The 7th Circuit Court of Appeals has upheld the finding that a Brownsburg attorney and his wife fraudulently withheld their 2001 income from the Internal Revenue Service through an elaborate shell game.

In Scott C. Cole and Jennifer A. Cole v. Commissioner of Internal Revenue, No. 10-2194, Scott and Jennifer Cole appealed the finding that they omitted more than $1.2 million of income and more than $1.3 million of self-employment income from their 2001 joint tax return and penalties imposed for fraudulently doing so. Scott, a business planning and tax attorney, formed a partnership with his attorney brother under the Bentley Group. Scott also created other entities – some owned by him and some with other family owners – and used them to transfer income.  

In 2001, Scott performed legal work on a trust that earned him $1.2 million. But instead of reporting that money, it was shifted among the various entities. The Coles underreported their income for 2001 and were eventually audited by the IRS. They petitioned the Tax Court for relief after the IRS determined they significantly underreported their income and assessed a $556,187 income tax deficiency and a $417,140 fraud penalty against the couple. The Tax Court entered a final decision upholding the deficiency and penalty amounts and also assessed an additional $178,000 in deficiency and fraud penalties.

Scott, who represented himself on appeal, only made two arguments the 7th Circuit found could be addressed: whether the Tax Court erred in finding the Coles omitted income from their 2001 tax return; and whether the Tax Court erred in imposing a fraud penalty.

The Coles were unable to produce records supporting the amounts they actually claimed on taxes and the evidence before the Tax Court showed they actually made a great deal more than they claimed, wrote Judge John Tinder. The appellate court also rejected the Coles’ argument that Scott did not actually earn the money but the Bentley Group did. They found the couple’s argument regarding the 2001 filing “only accents the game of thimblerig suggested by Scott’s legal and financial maneuvering.”

The judges also upheld the fraud penalty imposed, noting the Tax Court cited a variety of factors to show the commissioner proved with clear and convincing evidence that the couple understated their 2001 tax liabilities.

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  1. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  2. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  3. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  4. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  5. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

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