Audits & Appeals

Collection

State & Local
Taxation

Civil Tax Litigation has included such
diverse matters as:

• Successfully suppressing the use of wiretap evidence in a

civil tax case, resulting in the abatement of a tax assessment
on wagering income.
 
• Obtaining abatement of an income tax assessment when the

IRS failed to issue a notice of deficiency following termination
of the taxpayer's taxable year and the seizure of cash.
 
• Obtaining an opinion from the Arizona Supreme Court that

court reporters who provide their services to attorneys are
independent contractors and not employees of the firms that
act as booking agents and handle billings for the reporters.
 
• Obtaining a substance over form decision from the United

States Tax Court recognizing for tax purposes a sale/lease-
back of computer equipment involving the Greyhound Corp.
 
• Successfully litigating in the United States Tax Court the

IRS's disallowance of the pass through of the investment tax
credit to a national trailer rental company (U-haul) that sold
its equipment to private owners who then leased the equip-
ment back to U-Haul under a sale/leaseback arrangement.
 
• Obtaining refunds of federal and state income taxes paid by

corporate officers in connection with stock options issued to
them for the performance of services by establishing that the
restricted options had no determinable fair market value.
 
• Successfully litigating a captive insurance case for Amerco,

the holding company of the U-Haul Rental System. In a case
of first impression, the United States Tax Court and the Ninth
Circuit Court of Appeals departedfrom existing authority,
held that Amerco and its wholly owned subsidiarieswere
separate economic entities and that insurance premiums
paid by the parent and its subsidiaries to the captive insurer
were deductible.
 
• In a number of different fact situations, obtained innocent

spouse relief for one spouse for income tax liability arising
from the filing of joint income tax returns.
 
• Represented a life insurance company litigating its claim for

the  recovery of  income taxes paid in connection with a rein-
surance transaction with another insurer. The principal issue
included  whether the  reinsurer's  income in an  assumption
reinsurance  transaction  includes the  intangible value of the
block of  insurance policies acquired;  whether  the excess of
reserve liability over tangible assets received was the assuming
company's  cost  in  acquiring the  policies,  which had to be
amortized over the life of the policies; and whether the assum-
ing  company's  income  had to be  adjusted to  include the
revaluation of reserves.
 
• Obtaining the total abatement of a jeopardy assessment of over

$1 million through litigation in the United States District Court.
 
• Filed many bankruptcies to resolve federal and state income

tax problems.
 
• Appointed as special tax counsel by the United States Bank-

ruptcy Court in several cases to resolve tax liability disputes
with the Internal Revenue Service.
 
• In a number of different fact situations, obtained the return of

monies  forfeited by the  government in  connection with cash
deposits to bank accounts which the IRS alleged were struc-
tured to avoid the currency transaction report requirements.
 


 

Audits and Appeals:
 

• We resort to  litigation  only when it is in the  client's best

interest. Most civil tax disputes are settled at the audit or
appeals  office  level,  even  in  cases where it was initially
necessary  to  file a  court action.  In audits,  aswell as in
cases which have been brought in the federal and state tax
courts, we pursue a strategy to maximize the chance of an
early settlement, and yet lay the groundwork for litigating
the dispute if the case cannot be resolved at the adminis-
trative level.

Audit and appeal work has included:
 

• Negotiating the settlement of IRS tax claims against Circle

K in a Chapter 11 bankruptcy proceeding, which reduced the
IRS's claims for income taxes and backup withholding from
in excess of  $70 million toless than $12 million.
 
• Convincing the Arizona Department of Revenue that a former

resident's failure to file nonresident income tax returns report-
ing Arizona income should not be referred for criminal prose-
cution, but resolved in a civilproceeding.
 
• Represented a large megacar dealership in an IRS audit of a

return which deducted costs of acquiring the assets of another
dealership. The IRS agreed to allocate a major portion of the
purchase price to a covenant not to compete, a deductible
expense.
 
• After filing petitions in the United States Tax Court for the

shareholders of a large supermarket chain, challenging indi-
vidual income tax deficiencies and penalties proposed by the
IRS as a result of audit adjustments to the corporate returns
of C corporations merged into an S corporation, negotiated a
favorable settlement with the AppealsOffice of the IRS. Prin-
cipal issues included the tax treatment of add-itional stock
received by the shareholders in the reorganization, accrued
compensation due for past services, and shareholder loan
accounts.
 
• Obtaining favorable determinations from the Appeals Office

of the IRS in a number of cases where the reasonableness of
compensation paid corporate officers was challenged.
 
• Convincing the Internal Revenue Service, in a number of cases,

that  corporate officers  were not  individuals  liable for the 100%
penalty  on taxes  withheld from  employees by  the corporate
employer but not paid over to the IRS.
 
• After appeal to the IRS Director of Practice and litigation in the

United  States  District  Court, convinced the Government con-
ceded preparer penalties asserted against a prominent CPA.
 
• Obtained a Full Concession by IRS Appeals in a Section 183 Case (Hobby Loss) for a Race-Car Owner Involved in IRL and Cart Racing.

 
• Obtained a full Concession on Answer by IRS Office of Chief Counsel in a Fraud Case Proposing More than $5 Million in Deficiencies and Penalties.

 
• Obtained a Full Concession by IRS Appeals, Including a Net Operating Loss of Over $1 Million and a Capital Loss of Approximately $2 Million.

 
• Mediated before retired United States Tax Court Judge Carolyn Parr a $1.2 million valuation of the “Palo Verde Inn” compound when the IRS originally proposed a zero valuation.

 

 
 
 
 


 

Criminal Tax
 

• For more than five decades, collectively, we have vigorously

represented individuals and corporations who are targets,
subjects  or  witnesses  in criminal  tax and  other types of
financial investigations by the Internal Revenue Service, the
Dept. of  Justice and the ArizonaDepartment of  Revenue.
These matters include administrative andgrand jury inves-
tigations,  trials in  Federal  District  Court and  the state's
superior courts, appeals, as well as Internal Revenue Service
and Dept. of Revenue civil audits which have the potential to
be referred for criminal investigations.
 
• We have developed a particular skill not only in litigating

criminal cases, but also in resolving them discreetly, and
often at the early stages of the investigation.

Criminal tax matters have included:

• Obtaining a permanent injunction from the United States

District Court which enjoined a criminal investigation of a
lawyer conducted in the guise of a civil tax audit and, on
appeal to the Ninth Circuit Court of Appeals, the suppres-
sion of all evidence and leads therefrom illegally gathered
by the IRS.
 
• Obtaining an injunction from the United States District

Court, suppressing evidence seized by IRS agents in an
undercover investigation of a local business owner con-
ducted as part of a national business opportunities sting
operation.
 
• Obtained a judgment of acquittal for a doctor tried on charges

of filing false personal income tax returns following a jury vote
of 11 to 1 for acquittal.
 
• Obtained the return of three million dollars and other property

seized by the IRS and other federal agents under an Internal
Revenue Code section authorizing the forfeiture of property
used or intended to be used in violating the internal revenue
laws after litigating in two different states.
 
• Representing a foreign national residing in the United States

before a federal grand jury seeking a written consent to the
disclosure of alleged foreign bank records otherwise protected
by the laws of the foreign sovereign and in a subsequent con-
tempt proceeding before the United States District Court, the
Ninth Circuit Court of Appealsand the United States Supreme
Court.
 
• Obtained the acquittal on charges of income tax evasion of a

dentist characterized as a tax protester by the IRS who held a
good faith belief that he had a constitutional right not to provide
information concerning his income on returns he filed, and dis-
played sincere contrition that hehad been misled.
 
• Negotiating a plea to the misdemeanor of failing to supply

information in return for the dismissal of conspiracy and tax
evasion charges against a businessman involved in a complex
international insurance and loan transaction.
 
• Acting as amicus curiae in obtaining a new trial for a husband

and wife convicted in a failure to file case where the state court
denied the taxpayers the opportunity to present a good-faith
defense.
 
• Obtained a judgment of acquittal for a CPA who when contac-

ted by criminal investigators from the Arizona Department of
Revenue had not filed state income tax returns and was subse-
quently charged with four class two scheme and artifice to
defraud felonies and four class five falsifying income tax return
felonies which related to allegedly claiming false tax deductions
over a four-year period in excessof a half million dollars; in the
civil audit to follow, the agreed upontax liability without any
penalties was less than $2,500 for the four-year period.
 
• Negotiated a plea to a one count misdemeanor of failing to supply information in lieu of felony charges for two years of tax evasion and filing false returns against dentist.

 

 
 
 


 

Collection

• We regularly deal with Internal Revenue Service and Arizona

Department of Revenue collection personnel, by helping clients
deal with liens, levies and seizures. The firm's attorneys nego-
tiating installment agreements and offers in compromise, and
where appropriate, advise clients as to the discharge of taxes
in bankruptcy.
 


 

State & Local Taxation
 

• We provide a wide variety of services with respect to state and

local taxes such as the transaction privilege tax (sales and use
taxes). The firm represents taxpayers in audits by the Arizona
Department of Revenue and city taxing authorities.

State and local tax matters have included:

• Obtaining the dismissal of criminal charges against an owner/

officer of a construction company in connection with the filing
of city sales tax returns alleged to be false and the resolution of
the sales tax obligations on a civil basis.
 
• Representing a Native American Tribe in a tax audit conducted

by the Arizona Dept. of Revenue, resulting in the abatement of
the proposed sales tax assessments.
 
• Represented a contractor involved in a joint venture with a

Native American in a transaction privilege tax controversy
with the Arizona Department of Revenue where no tax was
adjudicated due to owing.