Kaplan v. Comm'r of Internal Revenue, No. 14-2342 (8th Cir. 2015)
Annotate this CaseKaplan operated an illegal sports-booking business in New York that moved to Costa Rica in the 1990s. In 2004, the company went public on the London Stock Exchange. Before going public, Kaplan placed $98 million in trusts off the coast of France. Kaplan neglected to pay federal income or capital gains tax for the trusts for 2004 and 2005. In 2006, Kaplan was indicted for operating an illegal online gambling business within the U.S. Kaplan accepted a plea agreement, which stated: [N]othing contained in this document is meant to limit the rights and authority of the United States … to take any civil, civil tax or administrative action against the defendant. The court asked: Do you understand … that there is a difference between a criminal tax proceeding and a civil tax proceeding … that [this] doesn't preclude the initiation of any civil tax proceeding or administrative action against you? Kaplan replied, "I understand." The court sentenced Kaplan to 51 months of imprisonment, and ordered forfeiture of $43,650,000. Later, the IRS issued Kaplan a notice of deficiency with penalties, totaling more than $36,000,000. The Eighth Circuit affirmed: since Kaplan failed to file a return, the period to assess taxes never began to run; the plea agreement was unambiguous; and the government's failure to object to the Presentence Report did not prevent the government from bringing a civil tax proceeding.
Court Description: Bye, Author, with Beam and Smith, Circuit Judges] U.S. Tax Court. Kaplan's failure to file a tax return for the 2004 and 2005 tax years allowed the Commissioner to assess taxes or initiate a civil tax proceeding at any time, and this civil action was not barred by the three-year statute of limitations; nor was this civil tax proceeding barred by defendant's guilty plea agreement in his criminal proceeding for running an illegal online gambling business or the doctrine of judicial estoppel.
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