Summary judgment reversed in retroactive tax case

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Finding a genuine issue of material fact as to when a company’s owners could have discovered that their plans investing in cash value life insurance were actually taxable, the Indiana Court of Appeals reversed summary judgment in favor of the consultant who advised the company’s owners to invest in those plans.

Richard Yarger and Robert O’Brien, owners and operators of Custom Radio Corp. and sole employees of Custom Management Group, appealed summary judgment in favor of Actuaries & Benefit Consultants Inc. and John Fogle. Fogle provided services to Yarger and O’Brien from 1995 to 2004, telling the men that their investments in two specific Welfare Benefit Plans would be tax-deductible.

The plans were designed to comply with 26 U.S.C. Section 419(A)(f)(6) so they would be tax-deductible, but in July 2003, the IRS issued final regulations with regard to that subsection that rendered Yarger’s and O’Brien’s plans noncompliant. As a result, their contributions were retroactively taxable. In February 2004, Fogle recommended that Custom Management switch to a single employer plan, which Custom Radio’s CPA handled.

After being audited by the IRS in March 2008, Yarger and O’Brien were found to owe nearly $750,000 in back taxes, penalties and interest. They settled with the IRS to avoid penalties. In October 2010, after signing the settlement agreements, the two men sued Fogle and his company alleging negligent provision of consulting services and breach of oral contract.

The trial court granted the defendants’ motions for summary judgment, ruling the applicable statutes of limitations had expired.

In Custom Radio Corp., Custom Management Group, Inc., Richard Yarger and Robert O'Brien v. Actuaries & Benefit Consultants, Inc., and John M. Fogle, 32A01-1303-CC-143, Yarger and O’Brien argued that the statutes of limitations didn’t begin until they signed the agreements with the IRS because they didn’t know their damages, but the Court of Appeals found this argument to be misplaced. Their causes of action accrued and the statutes of limitation began to run on the date they knew or, through the exercise of ordinary diligence, could have discovered that their Welfare Benefit Plans were non-compliant with Subsection 419(A)(f)(6) and that their plan contributions were retroactively taxable.

The question is whether they could have discovered this by April 30, 2004. The parties dispute whether Fogle told Yarger there would be no adverse tax consequences if Custom Management switched to a single employer plan. Fogle also said he told Yarger in February 2004 that the IRS had issued final regulations with respect to the subsection in question, but Yarger testified he was unaware of the final regulations and didn’t understand what the terms “experience rated” and “listed transactions” used by Fogle meant until they were audited.

The case is remanded for further proceedings.



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  1. If a class action suit or other manner of retribution is possible, count me in. I have email and voicemail from the man. He colluded with opposing counsel, I am certain. My case was damaged so severely it nearly lost me everything and I am still paying dearly.

  2. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  3. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.

  4. rensselaer imdiana is doing same thing to children from the judge to attorney and dfs staff they need to be investigated as well

  5. Sex offenders are victims twice, once when they are molested as kids, and again when they repeat the behavior, you never see money spent on helping them do you. That's why this circle continues