John Bullis: Couple pays back taxes and penalties

Mr. and Mrs. John E. Rogers were recently ordered by the tax court to pay taxes on unreported income and overstated expenses in addition to the extra accuracy related penalties.

Because they were both attorneys and he was a CPA with more than 30 years of experience, they were held to a higher standard.

The court found the tax basis (cost) was grossly overstated in some items they sold. They received income that was not reported. They claimed tax deduction for personal expenditures. They failed to keep records that were required for meals, travel and entertainment. They did not prove or substantiate the amounts and business purpose of many expenses.

The Rogers couple went to court with their canceled checks and credit card statements and some invoices and receipts, but the records were not organized and did not agree with the amounts claimed on their income tax returns.

They had three corporations. One deducted an expense that was paid to one of their other corporations. However, the income was not reported for the corporation that received the payment.

Good records were not kept to properly record personal expenses that were not deductible. They charged purchases on the credit cards for both personal and business expenses, but claimed the interest paid for the credit cards as 100 percent business expense (they should have only deducted the interest that related to the business expenditures)

For the years 2005 through 2008, one of their corporations deducted more than $3.4 million of business expenses.

Mr. Rogers was promoting a tax shelter that the court said he should have known would not result in the tax benefits he claimed. The court said “…his knowledge and experience should have put him on notice that the DAT tax shelter … would not generate the desired tax benefits.”

The court found Mr. Rogers’ testimony not to be believable.

The court upheld the extra penalties IRS assessed. Mr. Rogers represented himself in court.

It is no surprise the couple had to pay the taxes, interest and various penalties.

Did your hear, “Lives fall apart when the foundation upon which they were built needs to be relaid.” — Tyanla Vanzant

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.