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Famous Tax Quotes - The Proof of the Pudding is in the Eating

2024-04-21

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Continuing our series on Famous Tax Quotes, today's tax quote is from a Tax Court case by Judge Lauber.

In the case, the taxpayers argued that their signatures on an IRS closing agreement were forged. The closing agreement prohibited the taxpayers from claiming the foreign earned income exclusion (“FEIE”). The court found as a fact that they had signed the closing agreement.

The taxpayers did not claim the FEIE on their originally-filed 2016 tax return. In 2018, presumably after being contacted by John Castro, the taxpayers amended their 2016 tax return and claimed the FEIE.

Judge Lauber wrote:

Finally, the proof of the pudding is in the eating. Mr. Diaz received wages from his employment at Pine Gap during 2015, but petitioners did not claim the FEIE on their 2015 tax return. Mr. Diaz received wages from his employment at Pine Gap during 2016, but petitioners did not claim the FEIE on the return they originally filed for 2016. Mr. Diaz asserted that he regarded the FEIE as such a valuable tax benefit that he would rather quit his job than forfeit that benefit. If that were true, petitioners’ failure to claim the FEIE on two consecutive tax returns is inexplicable.

Diaz v. Commr. , T.C. Memo. 2024- 45

Footnote 3 in the case provides in part:

A 19-page post-trial brief was submitted on petitioners’ behalf. It is devoted largely to technical questions about tax treaties, Australian law, and other matters irrelevant to the signature authenticity issue. Petitioners admitted at trial that they were “working with” a lawyer named John Castro. Mr. Castro did not enter an appearance in this case; he is not admitted to practice in this Court (or apparently in any other court); and he was recently indicted for tax crimes. See Press Release, U.S. Dep’t of Justice, Mansfield Man Charged in Fraudulent Tax Return Scam (Jan. 10, 2024), https://www.justice.gov/usao-ndtx/pr/mansfield-man-charged-fraudulent-tax-return-scam. The Court believes that petitioners’ post-trial brief was likely ghost-written by Mr. Castro or someone associated with him. * * *

Tags: Other - Famous Tax Quotes, 911 Foreign Earned Income Exclusion