I just became aware of this: McBride #1 – Court Holds Government Must Prove FBAR Willful Penalty by a Preponderance (11/11/12). I thought it might be interesting for all of you.
What I found most interesting was Townsend’s commentary:
Based on the detailed findings of fact, the Court first determined that the Government need prove willfulness only by a preponderance of the evidence rather than by clear and convincing evidence. Since the Court’s recitation of facts was so damning, it is not clear that the Court would have reached a different conclusion even if the burden were clear and convincing. Nevertheless, here is what the Court said about its holding on the preponderance of the evidence burden…
What is irritating is that there seems to be little or no caselaw available as to minnows (the vast majority of people involved with our issues at IBS, Maple, ACA, and elsewhere.) I should hope that cases such as that mentionned by Townsend would not be used as precedents where smaller amounts were at stake, especially in the case of USPs in bone fide residence abroad who might have FBAR/FATCA/double taxation issues as to assets and income obtained through bone fide and legal activity abroad. Townsend’s description of the case leads me to believe that the defendant engaged in operations destined to hide the proceeds of activities conducted in the US, such proceeds which may have been subsequently hidden abroad. What appears to be the problem here is that the focus is on civil litigation, and not criminal (where the standard of proof would be beyond a reasonable doubt). This is a major problem that we have: because civil and criminal penalties are mixed in such a way that it would be difficult for the minnow to disentangle the two and apply 4th, 5th, and other bill of rights protections.
As I have always said, I believe that there must be further potential defenses/causes of action based upon national sovereignty and dominant nationality issues, as well as non-US Constitutional protections that are in analogy to the 4th, 5th, 6th, 8th, 9th amendments (as well as the 1st as to punishment for so-called “frivolous arguments”), as well as many other protections that are better defined in some non-US constitutions than they are in the US Constitution, and that go beyond the US Constitution. I wish we had more information about people–especially “minnows”–that actually used such arguments in court– if anyone has actually had the oppourtunity to do so as yet.
Disclaimer: Townsend says on his blog that what he writes there is not intended for laypersons, but rather for tax professionals and tax students. I am not a lawyer nor a tax professional or student, and this present post is not legal or tax advice.