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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. It really doesn't matter what the law IS, if law enforcement refuses to take reports (or take them seriously), if courts refuse to allow unrepresented parties to speak (especially in Small Claims, which is supposedly "informal"). It doesn't matter what the law IS, if constituents are unable to make effective contact or receive any meaningful response from their representatives. Two of our pets were unnecessarily killed; court records reflect that I "abandoned" them. Not so; when I was denied one of them (and my possessions, which by court order I was supposed to be able to remove), I went directly to the court. And earlier, when I tried to have the DV PO extended (it expired while the subject was on probation for violating it), the court denied any extension. The result? Same problems, less than eight hours after expiration. Ironic that the county sheriff was charged (and later pleaded to) with intimidation, but none of his officers seemed interested or capable of taking such a report from a private citizen. When I learned from one officer what I needed to do, I forwarded audio and transcript of one occurrence and my call to law enforcement (before the statute of limitations expired) to the prosecutor's office. I didn't even receive an acknowledgement. Earlier, I'd gone in to the prosecutor's office and been told that the officer's (written) report didn't match what I said occurred. Since I had the audio, I can only say that I have very little faith in Indiana government or law enforcement.

  2. One can only wonder whether Mr. Kimmel was paid for his work by Mr. Burgh ... or whether that bill fell to the citizens of Indiana, many of whom cannot afford attorneys for important matters. It really doesn't take a judge(s) to know that "pavement" can be considered a deadly weapon. It only takes a brain and some education or thought. I'm glad to see the conviction was upheld although sorry to see that the asphalt could even be considered "an issue".

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