Posts Tagged ‘Snipes’

This Name Looks Vaguely Familiar

Thursday, November 1st, 2018

I’m a tax nerd. I read Tax Court decisions. Today, one caught my eye: W.T. Snipes v. Commissioner. This name looks vaguely familiar.

Yes, it’s the Wesley Snipes. Mr. Snipes, for those who don’t remember, visited ClubFed for failing to file tax returns in the early 2000s. Today’s decision begins,

P[etitioner] has Federal income tax liabilities of approximately $23.5 million for tax years 2001-06. These liabilities are largely a result of P’s failure to file Federal income tax returns. R[espondent] assessed these deficiencies, filed a notice of Federal tax lien (NFTL), and issued notice and demand for payment of the liabilities, and, when P did not pay, issued to P a notice of the filing. P timely requested a collection due process hearing under I.R.C. sec. 6330(d) and stated that he wanted a collection alternative–i.e., an offer-in-compromise (OIC) or currently not collectible status–and wanted the NFTL withdrawn. P did not challenge his underlying tax liabilities. P made a cash OIC of $842,061, less than 4% of his total underlying liability.

The tax liability is now about $23.5 million. Interestingly, back in 2008 (when Mr. Snipes was tried for failing to file) he and his then-attorney, Robert Bernhoft, said he would pay his taxes. That apparently didn’t happen.

The Tax Court dispute is over Mr. Snipes’ having a Federal tax lien being put on him. Mr. Snipes submitted an Offer In Compromise (OIC) stating there was doubt as to whether the $23.5 million could be collected. When an OIC is submitted, the taxpayer must provide a complete listing of all of his assets and liabilities. In many cases an OIC is justified. Mr. Snipes alleged that a former financial advisor of his took out loans and disposed of assets and income on his behalf without his knowledge or benefit. Indeed, the advisor signed affidavits. The Tax Court had an issue, though: “However, petitioner did not provide any definitive or otherwise bona fide documentation showing the dissipation or diversion of his assets or income.”

Something I’ve said before in discussing the Tax Court, you need to provide absolute proof and documentation. It appears that didn’t happen in this case. But I digress….

Following review of petitioner’s case the settlement officer reduced petitioner’s [reasonable collection potential (RCP)] to $9,581,027 in an effort to compromise for settlement purposes. Petitioner maintained his original OIC of $842,061. The settlement officer ultimately concluded that it was not in the best interest of the Government to accept petitioner’s OIC. The settlement officer’s manager reviewed the settlement officer’s actions regarding petitioner’s case and her rejection of petitioner’s OIC.

Mr. Snipes didn’t accept the ruling, so the case went to Tax Court.

Petitioner contends that the settlement officer abused her discretion in refusing his OIC by failing to (1) calculate petitioner’s exact RCP, (2) exclude dissipated assets, (3) conduct an expedited transferee investigation into Mr. Johnson, (4) consider whether the NFTL would cause petitioner economic hardship, and (5) satisfy the review obligations of section 7122(e)(1).

The Court did not give Mr. Snipes good news. The exact RCP isn’t required. The petitioner asked for $842,061; the settlement officer calculated $9,581,027; that’s a big difference. Without, in the view of the Tax Court, credible documentation of his assets, Mr. Snipes lost his first argument.

The argument regarding dissipated assets is more interesting. Here’s what the Court said:

Even though the settlement officer included potentially dissipated assets in petitioner’s RCP, she did not abuse her discretion. She was properly following published guidance that directs settlement officers to reject an OIC where issues of transferee liability are present unless the taxpayer includes the transferee amount in his offer. Petitioner had multiple entities in which his multiple assets, particularly his real estate properties, were held. The settlement officer could not determine petitioner’s assets clearly. Moreover, petitioner did not provide bona fide or definitive documentation showing that he no longer owned the assets in question or to what extent, if any, he had benefited from their dissipation. He provided only affidavits by [his financial advisor]. The settlement officer was justified in her calculation of petitioner’s RCP. [internal citation omitted]

I can see some basis for an appeal here. Given that the financial advisor was willing to sign affidavits saying he disposed of assets, there’s likely proof that those assets were disposed. On the other hand, you shouldn’t assume with the Tax Court. Consider that if Mr. Snipes had included proof of disposition he might have won this argument (and he might have won at Appeals, too).

The argument on transferee issues was a loser. The Internal Revenue Manual pt. states,

It is not necessary to actually seek or obtain any specific legal remedy in order to address * * * [transferee/nominee/alter ego] issues in an offer. However, the offer file must be clearly documented with the basis for including the value of a transferred asset in the RCP. Care should be taken so that the determination to include assets held by others is reasonable.

This was a losing argument.

The next argument was economic hardship.

Economic hardship is considered a “special circumstance” under which a settlement officer can accept an OIC that is considered significantly below a taxpayer’s RCP…Factors indicating “economic hardship” include: (1) a long-term illness, medical condition, or disability that renders the taxpayer incapable of earning a living, where it is “reasonably foreseeable that taxpayer’s financial resources will be exhausted providing for care and support during the course of the condition”; (2) a situation where the taxpayer’s monthly income is exhausted by providing for care of dependents without other means of support; and (3) a situation where, although the taxpayer has certain assets, the taxpayer is unable to borrow against the equity in those assets and the liquidation of the assets would render the taxpayer unable to meet basic living expenses…Petitioner contends that payment of his RCP as calculated by the IRS would render him unable to meet basic living expenses. [internal citations omitted]

If you can prove that paying the RCP would cause you to be unable to pay your living expenses, you normally do qualify for an OIC based on economic hardship. There’s just one problem here:

The taxpayer must submit complete and current financial documentation to the Commissioner to prove economic hardship. Petitioner has not submitted complete and current financial data to respondent, as he did not provide definitive or bona fide documentation of his assets. Accordingly, petitioner’s settlement officer could not determine that he could not borrow against the equity of his real property interests or other assets, or that the liquidation of these interests would render him unable to meet basic living expenses. Petitioner did not make a showing of economic hardship necessary to qualify for special circumstances.

The final argument was that the review obligations of Section 7122(e)(1) were not met. Petitioner stated that the Appeals Office manager was not an ‘independent’ reviewer. The Court rejected that argument, noting that this is exactly how the proposed rejection of an offer is reviewed.

While I do expect this case to be appealed, for now the tax lien stands. As I said years ago, it would have been far, far easier (and far, far less expensive) for Mr. Snipes to have simply paid his taxes in the first place. Of course, I would have missed out on years of great blog materials but it would have saved Mr. Snipes millions of dollars.


W.T. Snipes v. Commissioner, T.C. Memo 2018-184

Snipes Loses Another Appeal

Thursday, September 8th, 2011

The Eleventh Circuit Court of Appeals denied Wesley Snipes’ appeal of his convictions of willfully not filing tax returns. Mr. Snipes has about 26 months left on his three-year sentence.

No Sniping at the Supreme Court

Tuesday, June 7th, 2011

The Supreme Court denied Wesley Snipes’ appeal today. Wesley Snipes will likely remain in prison until 2013 on his failure to file tax return charges.

The Supreme Court rarely hears tax charges, and there really wasn’t either some novel issue in his case or a split between different Appeals Courts that would have led to the Court hearing the case.

Wesley Snipes Petitions the Supreme Court

Monday, March 7th, 2011

Wesley Snipes has submitted his petition for writ of certiorari to the US Supreme Court. Mr. Snipes would like to have his conviction reversed. As best as I can determine, Mr. Snipes is arguing that the case shouldn’t have been heard in Ocala, Florida. I guess I was wrong when I wrote a couple of years ago that Mr. Snipes was happy with the jury in Ocala.

In any case, the Supreme Court doesn’t hear many tax cases and it’s very unlikely they’ll elect to take up Mr. Snipes’ appeal.

Just What You Need for the Holidays: The Wesley Snipes Jail Breaker App

Wednesday, December 15th, 2010

The world of cellphones has changed markedly over the past 20 years. I remember my first cellphone: It was a carphone, and it must have weighed 15 pounds. The service on it wasn’t that great, but it was a necessary evil when moving between orange groves in the San Joaquin Valley.

Today, cellphones do just about everything. They have calculators, do email, browse the Internet, and even make phone calls. The iPhone store has thousands of apps, those wonderful add-ons that do just about everything. Android phones offer nearly as many apps.

There’s a website called, and they’ve decided to market a new app…the Wesley Snipes Jail Breaker App. From the Orlando Sentinel comes word of the new app. It’s a game where you would try to tap (or click) on $100 bills that appear on jailbars. The new app will be available for both the iPhone and Android phones.

And if Mr. Snipes endorses the new app, there’s a reward for him: $10,000. Of course, Mr. Snipes will owe tax on that but promises to pay the tax, too. Neither Mr. Snipes nor his attorney have responded to the offer according to the Sentinel.

Meanwhile, Mr. Snipes is likely braving the snow and cold in the federal prison camp near Erie, Pennsylvania.

Wesley Snipes to Appeal to Supreme Court; Wants Bail

Monday, November 29th, 2010

According to the BBC, actor Wesley Snipes has requested bail to be continued pending a further appeal of his convictions for income tax evasion. Judge William Terrell Hodges gave the Department of Justice until Tuesday to respond to Mr. Snipes’ request.

Very few tax cases are accepted by the Supreme Court; it is highly unlikely that the Supreme Court would elect to hear Mr. Snipes’ appeal. In my view Mr. Snipes is just prolonging the inevitable.

Still, I do agree with Mr. Snipes’ attorneys who stated in court filings,

Mr. Snipes has honored the court’s trust before, during trial, as well as pending sentencing and appeal…There is no reason to change the court’s judgment now. His ongoing and successful projects in the movie industry further ensure he would not consider fleeing.

Unfortunately for Mr. Snipes, I expect the DOJ to be less forgiving regarding bail.

Snipes Heading to ClubFed

Monday, November 22nd, 2010

This evening as I was changing channels I briefly saw an infomercial hosted by Wesley Snipes. Well, Mr. Snipes doesn’t actually appear in the commercial.

But in the new television show, Wesley Snipes spends three years at ClubFed, Mr. Snipes will be appearing. Mr. Snipes was ordered on Friday to surrender and begin his three-year sentence at ClubFed. Judge William Terrell Hodges noted in his opinion,

The defendant Snipes had a fair trial; he has had a full, fair and thorough review of his conviction and sentence. … The time has come for the judgment to be enforced….

Uh, Wesley, Your Guru Just Got 20 More Years

Wednesday, September 1st, 2010

Wesley Snipes is still fighting his upcoming visit to ClubFed. The troubles he got into are all courtesy of his tax guru, Eddie Kahn. Mr. Kahn received ten years at ClubFed for his ‘advice’ to Mr. Snipes. He just got 20 more years for conspiracy to defraud and mail fraud. Joe Kristan has more.

Government to Snipes: It’s Time to Head to ClubFed

Sunday, July 25th, 2010

With the recent ruling from the Court of Appeals denying Wesley Snipes’ appeal of his three misdemeanor tax convictions, the US Department of Justice has asked that Snipes head to ClubFed now. Mr. Snipes’ attorneys plan on responding to this shortly.

In any case, Mr. Snipes should not plan on being in any movies in the next year or two other than the ClubFed production of The Producers.

Snipes Loses Appeal; ClubFed Is on the Horizon

Friday, July 16th, 2010

Remember Wesley Snipes? The actor was convicted of three misdemeanor tax charges but has been free on bail while waiting for the 11th Circuit Court of Appeals to decide his appeal. Bad news for Mr. Snipes: “After thorough review, we affirm the rulings and judgment of the district court in all respects.”

The Appellate Court decision is available here. There’s nothing humorous in the decision, just a terse shoot-down of all of Mr. Snipes’ arguments. The most interesting part of the decision is the Court noting that misdemeanors can be just as serious as felonies, and it’s the amount of the tax loss that impacts sentencing.

The district court noted that misdemeanants who, like Snipes, had willfully failed to file their personal income tax returns had engaged in similar behavior to the felons who had received similar sentences. The guideline does not create disparity of the kind that would violate 28 U.S.C. § 991(b)(1)(B)…

The district court also did not err in finding that Snipes’s instruction to Baker to refuse to comply with the subpoena and his threat that “if you do contact them, you will have to pay the consequences” constituted obstruction of justice. We have long held that encouraging another person to avoid complying with a grand jury subpoena may be considered to be obstruction…

Although Snipes argues that there were mitigating factors that the judge did not specifically mention at sentencing, these facts — his college education, his family, and his charitable activities — do not compel the conclusion that the sentence crafted in accordance with the 18 U.S.C. § 3553(a) factors was substantively unreasonable. The district court acted well within its considerable discretion in sentencing Snipes to thirty-six months in prison.

While Wesley Snipes can attempt to appeal the case to the US Supreme Court, that court rarely hears tax cases, and its even rarer for the Supreme Court to hear a pedestrian case such as this. Realistically, Mr. Snipes will soon have to surrender to the Federal Bureau of Prisons for a three-year stay at ClubFed.