As reported in my April 7, 2016, October 3, 2016 and October 27, 2016 blog posts, former U.S. Tax Court Judge Diane L. Kroupa and her then husband, Robert E. Fackler, were indicted on charges of tax fraud. Specifically, they were each charged with one count of conspiracy to defraud the United States, two counts of tax evasion, two counts of making and subscribing a false tax return, and one count of obstruction of an IRS audit. The indictment was the result of an investigation conducted by the Criminal Investigation Division of the Internal Revenue Service and the United States Postal Inspection Service.
According to the indictment, the defendants, among other things, fraudulently claimed personal expenses such as rent for a personal residence, utilities, Pilates class tuition, spa fees, jewelry, clothing, music lessons and vacation costs as deductible expenses. In addition, the indictment states that the defendants understated taxable income by approximately $1 million and understated taxes owing by $400,000 or more.
On October 21, 2016, after Mr. Fackler entered into a plea agreement and provided the government with a detailed account of the matters giving rise to the indictment, Ms. Kroupa pleaded guilty to conspiring with Mr. Fackler to fraudulently omitting nearly $1 million of income from their federal tax returns. The fraudulent activity appears to have transpired for almost a decade – while Ms. Kroupa was a U.S. Tax Court judge.
Today, bringing this terrible saga to a final conclusion, the court sentenced Ms. Kroupa to 34 months in prison and three years of supervision upon her release. In addition, she and Mr. Fackler are required to pay $457,000 in restitution. Interestingly, Mr. Fackler, likely as a result of his plea agreement, was only sentenced to 24 months in prison and one year of post-prison supervision.
The final chapter of this book is now at an end. This case illustrates that even people that we have held in the highest esteem, such as this former U.S. Tax Court judge, can run afoul of the law.
Larry J. Brant is a Shareholder in Garvey Schubert Barer, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; New York, New York; Washington, D.C.; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "Planning Using IRC Section 1031 Exchanges," Oregon Society of Certified Public Accountants (OSCPA) Forest Products ConferenceEugene, OR, 6.22.18
- "Evaluating the Built-in Gains Tax for C to S Conversions After TCJA," New York University Summer Institute in Taxation – Advanced Conference on Subchapter SNew York, NY, 7.26.18-7.27.18
- "S Corporation Distributions – The Ins and Outs," New York University 77th Institute on Federal TaxationNew York, NY, 10.21.18-10.26.18
- Portland, OR, 11.7.18
- "S Corporation Distributions – The Ins and Outs," New York University 77th Institute on Federal TaxationSan Diego, CA, 11.11.18-11.16.18