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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. Good riddance to this dangerous activist judge

  2. What is the one thing the Hoosier legal status quo hates more than a whistleblower? A lawyer whistleblower taking on the system man to man. That must never be rewarded, must always, always, always be punished, lest the whole rotten tree be felled.

  3. I want to post this to keep this tread alive and hope more of David's former clients might come forward. In my case, this coward of a man represented me from June 2014 for a couple of months before I fired him. I knew something was wrong when he blatantly lied about what he had advised me in my contentious and unfortunate divorce trial. His impact on the proceedings cast a very long shadow and continues to impact me after a lengthy 19 month divorce. I would join a class action suit.

  4. The dispute in LB Indiana regarding lake front property rights is typical of most beach communities along our Great Lakes. Simply put, communication to non owners when visiting the lakefront would be beneficial. The Great Lakes are designated navigational waters (including shorelines). The high-water mark signifies the area one is able to navigate. This means you can walk, run, skip, etc. along the shores. You can't however loiter, camp, sunbath in front of someones property. Informational signs may be helpful to owners and visitors. Our Great Lakes are a treasure that should be enjoyed by all. PS We should all be concerned that the Long Beach, Indiana community is on septic systems.

  5. Dear Fan, let me help you correct the title to your post. "ACLU is [Left] most of the time" will render it accurate. Just google it if you doubt that I am, err, "right" about this: "By the mid-1930s, Roger Nash Baldwin had carved out a well-established reputation as America’s foremost civil libertarian. He was, at the same time, one of the nation’s leading figures in left-of-center circles. Founder and long time director of the American Civil Liberties Union, Baldwin was a firm Popular Fronter who believed that forces on the left side of the political spectrum should unite to ward off the threat posed by right-wing aggressors and to advance progressive causes. Baldwin’s expansive civil liberties perspective, coupled with his determined belief in the need for sweeping socioeconomic change, sometimes resulted in contradictory and controversial pronouncements. That made him something of a lightning rod for those who painted the ACLU with a red brush." http://www.harvardsquarelibrary.org/biographies/roger-baldwin-2/ "[George Soros underwrites the ACLU' which It supports open borders, has rushed to the defense of suspected terrorists and their abettors, and appointed former New Left terrorist Bernardine Dohrn to its Advisory Board." http://www.discoverthenetworks.org/viewSubCategory.asp?id=1237 "The creation of non-profit law firms ushered in an era of progressive public interest firms modeled after already established like the National Association for the Advancement of Colored People ("NAACP") and the American Civil Liberties Union ("ACLU") to advance progressive causes from the environmental protection to consumer advocacy." https://en.wikipedia.org/wiki/Cause_lawyering

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