Brockman Civil Case with Civil Fraud Penalties Settled (12/26/25)

 I have written before on the Brockman multi-year tax evasion scheme. See here. Brockman was indicted but, before he could be tried, he died, thereby resolving the criminal case without a verdict of guilty or not guilty.

The civil case was settled with entry of the Tax Court decision in Brockman Estate v. Commissioner (T.C. Case No. 764-22 Dkt. # 33 Order Dtd. 12/23/25), here. The decision document addresses the deficiencies and civil fraud penalties under § 6663. As is the nature of decision documents, the decision document does not address the interest on the tax and the penalties. The principal amounts of deficiencies and penalty are major, aggregating $750 MM; the interest which I roughly calculate to 12/24/25 at $782MM brings the total due to over $1.5 billion. I prepared a spreadsheet which I offer for review and download here. (Note that the interest calculations are rough and ready but should be in the ballpark.)

One small error in the Tax Court decision document is that the 2006 civil fraud penalty (§ 6663) is stated as $35,00,000.00 which I infer to be $35,000,000.00.

Obviously, given the numbers in the spreadsheet there is a facial anomaly because for the years 2006 and 2015 the civil fraud penalty amount exceeds 75% of the deficiency. I suppose there can be an explanation. There was a jeopardy assessment which may have applied some of the tax, but more likely there may have been an advance payment(s) that reduced the deficiency amounts (but not the civil fraud penalty amount). I just have not dug into that issue.

This blog entry is cross-posted on my Federal Tax Crimes Blog here.

Tax Court Judge Gustafson Enters Order Permitting IRS to Concede Without Merits Decision (11/6/21)

In an order in Puglisi v. Commissioner (T.C. Dkt Nos. 4796-20, 4799-20, 4826-20, 13487-20, 13488-20, 13489-20 Order served 10/29/21), here, the Tax Court (Judge Gustafson) permitted the IRS to concede the deficiency adjustments related to the taxpayers' microcaptive insurance and thus move to decision in the case.  Readers know that the IRS believes – strongly believes—that many forms of microcaptive insurance are abusive.  Many microcaptive deficiency cases are pending, and, of course, the Supreme Court recently held in CIC Svcs., LLC v. IRS, 593 U.S. ___, 141 S.Ct. 1582 (2021) that the material advisor reporting requirement imposed by IRS Notice for abusive microcaptives could be subject to pre-enforcement review.  As to CIC, see Supreme Court Holds in CIC Services that IRS Micro-Captive Notice May Be Contested Pre-Enforcement (5/17/21; 5/18/21), here.

In the Puglisi Order, the IRS conceded all of the adjustments related to the microcaptive insurance. Typically, if the IRS concedes, the taxpayer may be more than willing to accept the concession and move on, perhaps trying to recover attorney fees and costs under §7430.  In this case, the taxpayers apparently are unable to recover under § 7430 "' because of the technical limitations of I.R.C. section 7430.'”  (Slip Op. 6.) Here, the taxpayers do not want to move on but want to litigate the merits of the issues the IRS conceded. What is going on that requires an order of 17 pages?

The taxpayer speculates, as recounted in the Order, that (Slip Op 8-9):

Respondent has now concluded that he wants to abandon the tax deficiencies asserted in his notices of deficiency, apparently because he recognizes that Petitioners' cases are not the litigation vehicles that he wants to use to present his theories to this Court. But while Respondent is willing to abandon the asserted deficiencies, he is not willing to concede the inaccuracy of his determinations underlying the adjustments * * *. [The motions for entry of decision make a] strategic attempt to “concede” the overall amounts at issue, in order to avoid an adverse ruling on the specific determinations in the notices of deficiency * * *.

Judge Gustafson addressed the IRS’s litigating strategy later (Slip Op. 16-17):