Sometimes you just can’t win. Indeed, for local attorney Albert M. Graham, he was faced with a dilemma. His bookkeeper embezzled money from him. And that bookkeeper was the one who aided in your keeping of income away from the prying eyes of the IRS. What do you do?
Mr. Graham called the police. The net result was nasty for all concerned: the bookkeeper was arrested, fired, and Mr. Graham recovered much of the money; Mr. Graham sued his accountant because he didn’t detect the embezzlement; and the IRS went after Mr. Graham because he didn’t report all of income. The Tax Court ruled that Mr. Graham is liable for fraud penalties for understating his tax liability.
Hat tip: Roth & Company’s Tax Updates.