The Government also filed a motion for summary judgement upon which the Court has yet to act. The motion is here.
The facts alleged in the Government's motion for summary judgement, highly summarized, are:
Hom was an internet gambler. Internet gambling is illegal for U.S. persons. He maintained certain accounts related to the gambling with foreign institutions, FirePay.com, PokerStars.com, and Partypoker.com, not traditional financial accounts but functioned like them. And, of course, they were offshore.
The IRS picked up the issue in an income tax audit. The IRS issued a summons, the taxpayer did not comply, the IRS sued to enforce the summons, the district court ordered enforcement on 9/27/10, and thereafter the taxpayer complied.
On September 20, 2011, the IRS assessed Defendant with civil penalties under 31 U.S.C. § 5321(a)(5) for his non-willful failure to submit FBARs, as required by 31 U.S.C. § 5314, regarding his interest in his FirePay, PokerStars, and PartyPoker accounts. Id., Exs. 1-2; Ex. 5, RFA Nos. 24-25. The IRS assessed a $30,000 penalty for 2006, which was comprised of a $10,000 penalty for each of the three accounts, and a $10,000 penalty for 2007 based on only Defendant’s PokerStars account. Id. As of July 26, 2013, Defendant owed $45,178.09. Id., Ex. 3. Interest and penalties continue to accrue until paid in full pursuant to 31 U.S.C. § 3717.The issues presented on the motion for summary judgment are (number is the number of the issue as presented)
1. Was Defendant a United States citizen or resident during 2006 and 2007?
2. Are Defendant's accounts at FirePay.com, PokerStars.com, and Partypoker.com "bank, securities, or other financial account[s]" under 31 U.S.C. §§ 5412, 5314 and 31 C.F.R. § 103.24(a)?
3. Are Defendant's FirePay.com, PokerStars.com, and Partypoker.com accounts "in a foreign country under 31 U.S.C. §§ 5212, 5314 and 31 C.F.R. § 103.24(a)?
4. Are the asssets from Defendant's FirePay.com, PokerStars.com, and Partypoker.com accounts held in "foreign commingled funds" under IRS Notice 2009-62 (and modified by IRS Notice 2010-23) such that the filing deadline for FBARs for those accounts for 2006 and 2007 was extended to June 30, 2010?
5. Was Defendant’s failure to timely file his FBARs due to reasonable cause and the amount of the transaction or the balance in the account at the time of the transaction was properly reported as set forth in 31 U.S.C. § 5321(a)(5)(B)(ii)?
6. Did the IRS assess the FBAR penalties at issue within the six-year statute of limitations found in 31 U.S.C. § 5321(b)(1)?Blog readers interested in specific issues can download the pdf. I will note that the penalty seems relatively light, at least compared to some of the Government's swashbuckling assertions of the willful penalty in far less egregious cases.