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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. Someone off their meds? C'mon John, it is called the politics of Empire. Get with the program, will ya? How can we build one world under secularist ideals without breaking a few eggs? Of course, once it is fully built, is the American public who will feel the deadly grip of the velvet glove. One cannot lay down with dogs without getting fleas. The cup of wrath is nearly full, John Smith, nearly full. Oops, there I go, almost sounding as alarmist as Smith. Guess he and I both need to listen to this again: https://www.youtube.com/watch?v=CRnQ65J02XA

  2. Charles Rice was one of the greatest of the so-called great generation in America. I was privileged to count him among my mentors. He stood firm for Christ and Christ's Church in the Spirit of Thomas More, always quick to be a good servant of the King, but always God's first. I had Rice come speak to 700 in Fort Wayne as Obama took office. Rice was concerned that this rise of aggressive secularism and militant Islam were dual threats to Christendom,er, please forgive, I meant to say "Western Civilization". RIP Charlie. You are safe at home.

  3. It's a big fat black mark against the US that they radicalized a lot of these Afghan jihadis in the 80s to fight the soviets and then when they predictably got around to biting the hand that fed them, the US had to invade their homelands, install a bunch of corrupt drug kingpins and kleptocrats, take these guys and torture the hell out of them. Why for example did the US have to sodomize them? Dubya said "they hate us for our freedoms!" Here, try some of that freedom whether you like it or not!!! Now they got even more reasons to hate us-- lets just keep bombing the crap out of their populations, installing more puppet regimes, arming one faction against another, etc etc etc.... the US is becoming a monster. No wonder they hate us. Here's my modest recommendation. How about we follow "Just War" theory in the future. St Augustine had it right. How about we treat these obvious prisoners of war according to the Geneva convention instead of torturing them in sadistic and perverted ways.

  4. As usual, John is "spot-on." The subtle but poignant points he makes are numerous and warrant reflection by mediators and users. Oh but were it so simple.

  5. ACLU. Way to step up against the police state. I see a lot of things from the ACLU I don't like but this one is a gold star in its column.... instead of fighting it the authorities should apologize and back off.

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