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Former Tax Court Judge Kroupa Indicted

Posted on Apr. 5, 2016

Former Tax Court Judge Diane Kroupa and her husband were indicted yesterday on charges of conspiracy, tax evasion, making and subscribing false tax returns and obstruction of an IRS audit. I do not have much to add on this, other than wow, and obviously not in the Lily’s Purple Plastic Purse way.

The US Attorney’s Office press release is here; Jack Townsend over at Federal Tax Crimes has some initial thoughts on this here.

Some of the lowlights from the press release:

They fraudulently claimed the following personal expenses as deductible business expenses: rent and utilities for the Maryland home; utilities, upkeep and renovation expenses of the Minnesota home; pilates classes; spa and massage fees; jewelry and personal clothing; wine club fees; Chinese language tutoring; music lessons; personal computers; and expenses for vacations to Alaska, Australia, The Bahamas, China, England, Greece, Hawaii, Mexico and Thailand.

According to the indictment and documents filed in court, KROUPA and FACKLER made a series of other false claims on their tax returns, including failing to report approximately $44,520 that KROUPA received from a 2010 land sale in South Dakota. The defendants falsely claimed financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income.

According to the indictment and documents filed in court, in 2006, KROUPA and FACKLER concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit. During a second audit in 2012, KROUPA and FACKLER caused misleading documents to be delivered to an IRS employee in order to convince the IRS employee that certain personal expenses were actually business expenses of Grassroots Consulting.

According to the indictment and documents filed in court, between 2004 and 2010, KROUPA and FACKLER purposely understated their taxable income by approximately $1,000,000 and purposely understated the amount of tax they owed by at least $400,000.

Judge Kroupa resigned her position a couple of years ago. At the time, it was not clear (to me) why.  Now it looks like we know. A very sad day.

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