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Tuesday, March 25, 2003


The IRS charged Timothy Dean Strong and Strong Construction Company, Inc. with unreported income resulting from large cash deposits to bank account jointly held by Strong and SCC for several years in the 1990s. Strong claimed these were deposits from a large cash horde he held dating from before 1990. IRS alleged in an Amendment to Answer that Strong and SCC should be judicially estopped from asserting that he had a cash horde in 1990. Seems Strong filed a petition for bankruptcy in 1990, which was granted, where he did not list any cash or his sole ownership of SCC as assets.

Strong and SCC filed a motion for partial summary judgement to eliminate the claim of judicial estoppel. Strong claimed that he had been advised by his bankruptcy attorney, since suspended and retired, not to include the cash in the bankruptcy petition due to confusion over whether the cash belonged to Strong or SCC. IRS responded with a declaration from the bankruptcy attorney that he had not advised Strong to leave the cash off of the petition, and they filed an objection that attorney mistake is not an appropriate defense to judicial estoppel.

Tax Court denied the motion for partial summary judgement because there is a dispute about the factual basis (attorney mistake) of the defense to judicial estoppel. Because they denied the motion, Tax Court did not rule whether or not attorney mistake is a proper defense to judicial estoppel. But why not make such a ruling? By ruling the way they did, Tax Court runs the risk of wasting time by taking evidence on the factual issue, only to believe Strong but rule against him on the legal issue. Why not save the time and expense by ruling on the legal issue now?

My guess is that Tax Court would much rather make a decision based on the facts, rather than the law. If they do not believe Strong, they can dismiss his defense without ruling on the legal issue. Such a decision would be harder to overturn on appeal and does not create potentially bad precedent. And from reading the case, I believe that Tax Court expects that they will not find Strong to be a credible witness.

Free advice to Strongļæ½s attorney: Settle. Now.

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