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From Law 360
Law360, New York (March 31, 2016, 4:22 PM ET) — The U.S. Tax Court said Thursday that a former Internal Revenue Service agent who pled guilty to a criminal count of tax evasion nevertheless doesn’t owe taxes to the agency because the evidence shows that he did not have any unreported income.
Bohdan Senyszyn pled guilty to tax evasion in connection with embezzling some $250,000 from New Jersey real estate developer David Hook in 2003, but evidence presented by Senyszyn shows that he repaid Hook more than he took from him that year, which does not support the IRS’ asserted tax deficiency, the court said.
The doctrine of collateral estoppel does not require upholding the deficiency as it would not promote judicial economy, the Tax Court said.
Any inconsistency “would result not from conflicting findings by different courts but instead from Mr. Senyszyn’s entry of a guilty plea to a charge that the evidence — at least as presented to us — would not support,” Judge James S. Halpern said in the court’s opinion.
Senyszyn worked as an IRS agent in the late 1990s and early 2000s and persuaded Hook to give him control over his business to reduce his taxes, according to the opinion. In 2004, Hook filed a lawsuit against Senyszyn, alleging he embezzled money. An analysis by the IRS found that Senyszyn took a net of about $250,000 from Hook’s accounts, and Senyszyn pled guilty to failing to include that amount on his tax returns, the opinion said.
In 2008, Hook filed an amended tax return for 2003, reporting the $250,000 of additional gross income but also claiming expenses of some $475,000, according to the opinion. Senyszyn contended that the IRS agent who examined his accounts during the criminal trial made an error and did not include some transfers out of Senyszyn’s account in his calculations, the court said.
The IRS argued that the asserted tax deficiency should be sustained solely on the basis of Senyszyn’s guilty plea, but the Tax Court disagreed. The preponderance of the evidence shows that Senyszyn’s repayments to Hook in 2003 were greater than the amount he took, which does not support the asserted deficiency, the court said.
The court added that it had not previously considered whether the purposes of collateral estoppel require the determination of a deficiency for a prior conviction for tax evasion when the evidence shows that none exists.
“Now confronted with a record that puts squarely before us the question … we conclude that the purposes of the doctrine would not be served by upholding a deficiency unsupported by the evidence presented,” Judge Halpern said.
Senyszyn could not be reached for comment.
Senyszyn is representing himself in the case.
The IRS is represented by Marco Franco and Lydia A. Branche.
The case is Senyszyn et al. v. Commissioner, case number 9721-11, in the U.S. Tax Court.
–Editing by Christine Chun.
Weisberg Kainen Mark, PL
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