No. SJC-11807 (No. A.C_ -13-P-0876).
COMMONWEALTH OF MASSACHUSETTS SUPREME JUDICIAL COURT
GEORGE SCHUSSEL and SANDRA SCHUSSEL Appellants,
v.—
COMMISSIONER OF REVENUE, Appellee.
ON FURTHER APPELLATE REVIEW OF A DECISION OF THE APPELLATE TAX BOARD
BRIEF FOR APPELLANTS
Francis J. DiMento BBO No. 125000 DzMENTO & SULLIVAN 7 Faneuil Marketplace Boston, MA 02109-6113 (617) 523-2345
Attorney for the Appellants
Of Counsel: Jason A. Kosow BBO No. 644701
No. SJC-11807 (No. A.C.-13-P-0876)
COMMONWEALTH OF MASSACHUSETTS SUPREME JUDICIAL COURT
GEORGE SCHUSSEL and SANDRA SCHUSSEL Appellants,
a+~
COMMISSIONER OF REVENUE, Appellee.
ON FURTHER APPELLATE REVIEW OF A DECISION OF THE APPELLATE TAX BOARD
BRIEF FOR APPELLANTS
Francis J. DiMento BBO No. 125000 DzMENTO & SULLIVAN 7 Faneuil Marketplace Boston, MA 02109-6113 (617) 523-2345
Attorney for the Appellants
Of Counsel• Jason A. Kosow BBO No. 644701
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ...ii
ISSUE PRESENTED ...1
STATEMENT OF THE CASE ...1
STATEMENT OF THE FACTS ...5
ARGUMENT ...5
I. THE APPELLATE TAX BOARD'S RULING UPHOLDING THE COMMISSIONER'S DOUBLE-TAX ASSESSMENT WAS ERROR . ...5
A. Application of G.L. c. 62C, ~ 28...5
1. Appellants' disclosure and reliance on advice of tax professionals precludes imposing the double-tax assessment ...11
B. Application of the Amnesty Program...17
CONCLUSION ...24
CERTIFICATION PURSUANT TO MASSACHUSETTS RULE OF APPELLATE PROCEDURE 16 (k) ...25
DECISION BELOW, CITED LAWS and TIRs... Addendum
-TABLE OF AUTHORITIES Cases
Adams v. City of Boston,
461 Mass. 602 (2012) ... 20
Beeler v. Downey,
387 Mass. 609 (1982) ...20
Bolster v. Commissioner of Corporations & Taxa~inn
319 Mass. 81 (1946) ...21
Cheek v. United States,
498 U.S. 192 (1991) ... ... 11 Commonwealth v. Ballow, 283 Mass. 304 (1933) ... 13 Commonwealth v. Felt, 466 Mass. 316 (2013) ...20 Commonwealth v. O'Toole, 351 Mass. 627 (1967) ... 11
Fascione v. CNA Ins. Cos.,
435 Mass. 88 (2001) ...20
Food Service Associates, Inc. v. Commissioner of Revenue,.
2001 Mass. Tax. LEXIS 27 (May 11, 2001) ... 6
Lowell Bar Assn v. Loeb,
Mass. Care Self-Insurance Group, Inc. v. Mass. Insurers Insolvency Fund,
458 Mass. 268 (2010) ...20
McMurray v. Commissioner of Internal Revenue,
985 F.2d 36 (1st Cir. 1993)
...
14, 15Metropolitan Life Insurance Co. v. Burno,
309 Mass. 7 (1941) ...7
Peter Ruggiero, Inc. v. Commissioner of Revenue,
18 Mass. App. Tax Bd. Rep. 19 (1995) ...6
Saphier v. Devonshire Street Fund, Inc.,
352 Mass. 683 (1967) ...6
Scagel v. Commission of Revenue,
13 Mass. App. Tax Bd. Rep. 38 (1990)
...
7, 12Schussel v. Commissioner of Revenue,
86 Mass. App. Ct. 419 (2014) ... 17
Stow v. Commissioner of Corporations & Taxation,
336 Mass. 337 (1957) ...6
Suprenant v. Commissioner of Revenue,.
14 Mass. App. Tax Bd. Rep. 12, 18 (1991)...6
United States v. Boyle,
469 U.S. 241 (1985)
...
13United States v. Pechenik,
236 F.2d 844 (3rd Cir. 1956) ...7
Xtra, Inc. v. Commissioner of Revenue,
Laws, Regulations and TIRs
General Laws Chapter 62C ... Passim
830 Code Mass. Regs. ~ 62C.26.1 ... 19, 20, 21
Session Law Chapter 461 of the Acts of 2008: An Act Relative to the Establishment of
a Tax Amnesty Program by the Commissioner
of Revenue ... ... 17, passim
Department of Revenue Technical Information Release (TIR) 09-3: Limited Amnesty Program For Individual Taxpayers With Existing Tax
Liabilities ...4, 17, passim
-ISSUE PRESENTED
Whether the Appellate Tax Board's ruling
upholding the Commissioner's double-tax assessment was error.
STATEMENT OF THE CASE
On May 15, 2007, the Commissioner issued a Notice of Failure to File Return for the tax years 1993, 1994 and 1995 pursuant to G.L. c.
62C, §28.
On May 30, 2007, the Appellants, by facsimile correspondence, acknowledged their receipt of said Notice of Failure to File Return.
On June 13, 2007, by facsimile communication to the Commissioner, the Appellants confirmed that the requested returns would be filed by June 20, 2007, per agreement.
On June 19, 2007, the Appellants filed
Massachusetts non-resident income tax returns for the years ended December 31, 1993, December 31, 1994, and December 31, 1995, with reported tax liabilities of $6,133, $6,395 and $22,935 respectively. (App.11,
22-33)1
1 The record appendix will be cited as follows:
,LAPP • [Page] . „
-Pursuant to a Notice of Assessment dated June 27, 2007, the Commissioner, on the basis of the returns as filed, assessed the following amount of tax, interest and penalties for the following periods (App.l2, 33-34)
Date of
Tax Period Assessment Tax Interest Penalty 12/31/1993 6/19/07 $ 6,133.00 $15,797.47 $ 3,328.25 12/31/1994 6/19/07 6,395.00 14,357.44 3,542.03 12/31/1995 6/19/07 22,935.00 42,410.15 11,898.14
On July 24, 2007, the Appellants paid the total assessment resulting from the returns filed for 1993 through 1995 and the corresponding Notice of
Assessment dated June 27, 2007. (App.12).
Pursuant to G.L. c. 62C, ~26(d), the Commissioner issued Notice of Assessment dated August 7, 2007, and assessed the following amount of tax, interest and penalty, including double assessment pursuant to G.L. c. 62, §28, for the following periods (App.12, 38):
Date of
Tax Period Assessment Tax Interest Penalty Total 12/31/1993 8/06/07 $337,764 $856,377 $84,441 $1,278,582 12/31/1994 8/06/07 337,764 740,702 84,441 1,162,907 12/31/1995 8/06/07 337,764 628,711 84,441 1,050,916 $3,492,405
-On August 9, 2007, the Commissioner, pursuant to G.L. c. 62C, X29, issued a Final Demand Before Legal Action in the amount of $3,492,405.91 for the tax years 1993, 1994 and 19.95, which included the G.L. c. 62C, §28 double assessment. (App.l2)
On February 19, 2008, Appellants filed Form CA-6: Application for Abatement/Amended Return seeking
abatement of the additional tax, interest and penalties, including G.L. c. 62, §28 double
assessment, and requesting a statutory hearing at the Office of Appeals.
On February 19, 2008, the Appellants filed
Form DR-1 Appeals Form requesting a hearing pursuant to G.L. c. 62C, §37 and settlement consideration pursuant to G.L. c. 62C, ~37(c).
On April 30, 2008, statutory hearing pursuant to G.L. c. 62C, X37 was held at the Office of Appeals.
On September 30, 2008, the Commissioner issued a Letter of Determination finding that no adjustment to assessment should be made. On October 10, 2008, the Commissioner issued a Notice of Abatement
Determination denying the abatement application. (App.12-13)
-On December 8, 2008, the Appellants filed a
Petition under Formal Procedure with the Appellate Tax Board . (App . 13 )
On February 25, 2009, the Commissioner issued a Tax Amnesty Notice pursuant to TIR 09-3 for the tax
years 1993, 1994 and 1995. Pursuant to the Tax
Amnesty Notice, the Appellants made full payment, and taxpayers' current outstanding liability is $0.
(App.13, 42)
Pursuant to the Supplemental Agreed Statement of Facts, based on Internal Revenue Service Letter 692 and Form 4549-A issued January 20, 2009, the following items of Adjusted Income, Personal Income Tax and
Personal Income Tax Pursuant to §28 were the subject of Appellants' Appellate Tax Board Petition (App.19-20) Tax Period Adjusted Income Amount of Personal Income Tax Amount of Personal Income Tax Pursuant
to Section 28 12/31/93 $1,661,709 $ 98,871.69 $197,743.37 12/31/94 2,354,817 140,111.61 280,223.22 12/31/95 3,341,868 198,841.15 397,682.29 $7,358,394 $437,824.45 $875,648.88 4
-On March 4, 2013, the Appellate Tax Board
promulgated its Findings of Fact and Report, in which, inter alia, the board upheld the Commissioner's
double-tax assessments and ruled that the
Commissioner's written policy governing limitation periods for non-filing taxpayers did not apply to the appellants. (Add.Al-A45; App.59-103)2
This appeal followed.
STATEMENT OF THE FACTS
The fact-intensive issue relating to domicile is not before this Court; therefore, the foregoing
Statement of the Case will also serve as a statement of the relevant facts for the purposes of this appeal.
ARGUMENT
I. THE APPELLATE TAX BOARDS RULING UPHOLDING
THE COMMISSIONER'S DOUBLE-TAX ASSESSMENT WAS ERROR. A. Application of G.L. c. 62C, ~ 28
The Appellate Tax Board (hereinafter, the
"Board") found that the taxpayers "knowingly filed false and fraudulent returns", and, based on that finding, the Board ruled that "the Commissioner was justified in applying. the double-assessment
2 The addendum will be cited as follows: "Add. [Page] ."
-penalty in G.L. c. 62C, X28". That statute, insofar as relevant to this finding and ruling, provides that:
". if a person has filed a false or fraudulent return. ., the
commissioner may determine the tax due, according to his best information and belief, and may assess the same at not more than double the amount so
determined. ."
In cases of claimed fraud, the burden of proof lies with the Commissioner. See Food Service
Associates, Inc. v. Commissioner of Revenue, Appellate Tax Board Docket Nos. 255109 and 255110 (May 11,
2001), 2001 Mass. Tax. LEXIS 27; Peter Ruggiero, Inc. v. Commissioner of Revenue, 18 Mass. App. Tax Bd. Rep. 19, 23 (1995); Suprenant v Commissioner of Revenue, 14 Mass. App. Tax Bd. Rep. 12, 18 (1991). "It is well settled that fraud will not be presumed. It must be specifically alleged and proved by the party who relies upon it, for purposes of either attack or defence." Stow v. Commissioner of Corporations &
Taxation, 336 Mass. 337, 341 (1957); accord Saphier v. Devonshire Street Fund, Inc., 352 Mass. 683, 689 n.8
(1967) .
Fraud cannot be shown by mere proof that a party made an error of fact. Rather, the party bearing the burden of proof must demonstrate "an actual intent to
-deceive.
." Metropolitan Life Insurance Co. v. Burno, 309 Mass. 7, 11-12 (1941). As the Board
previously held in Scagel, "'the conscious purpose to defraud does not include negligence,
carelessness, misunderstanding, or unintentional understatement of income. Speculation and intuition cannot be substituted
for proof. This is so even on the civil side in tax cases where the burden of proof upon the government is less than that which prevails in criminal cases ."' Sca el v. Commissioner of Revenue, 13 Mass. App. Tax Bd. Rep. 38, 48 (1990), quoting United States v. Pechenik, 236 F.2d 844, 846-847 (3rd Cir. 1956).
The returns in question are income tax returns for the years 1993 (App.22-24), 1994 (App.25-27) and 1995 (App.28-30)
All three were filed on June 19, 2007 (see "received" stamp on each return); all in timely response (App.33) to the Commissioner's Notice of Failure to File dated May 15, 2007 (App.31).
The issue here presented is whether, as ruled by the Board, the three returns were "false or
fraudulent" within the meaning of G.L. c.62C, X28, thus justifying the imposition of the
double-assessment penalty. The ruling was error.
-In the first place, the three returns each
carried a rider in bold, upper-case letters, reading as follows:
TAXPAYER IS CURRENTLY A PARTY TO A CRIMINAL TAX CASE BROUGHT BY THE U.S. ATTORNEY'S
OFFICE FOR WHICH THE DETAILS CAN BE FOUND AT UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MASSACHUSETTS, DOCKET NO. 04-10060. ITEMS OF GROSS INCOME DETERMINED PURUSANT [sic] TO SAID CASE ARE THE SUBJECT OF A PENDING APPEAL REGARDING AMOUNT,
CHARACTERIZATION AND SOURCE. INCOME WHICH IS THE SUBJECT OF SAID CASE/APPEAL HAS NOT BEEN REPORTED ON THIS RETURN DUE TO THE UNCERTAINTIES DESCRIBED ABOVE.
(App.24, 27, 30) (emphasis in original).
Secondly, as is apparent on the face of the returns, all three were prepared and signed by Massachusetts lawyers (App.22-30, 32) Indeed, the taxpayers' address on all three returns is given as that of the preparers (App.22-30), and all
correspondence that preceded,3 as well as followed, the filing of the returns was solely between the
Commissioner and the preparers, without involvement of the taxpayers (App.31-42).
3 It is particularly noteworthy that the document
which began this controversy, the Notice of Failure to File Return, dated May 15, 2007, was addressed to the appellants' lawyers, with no indication even of a copy being sent directly to the taxpayers.
-Third, even had there been no disclosure and no intervention by counsel, the returns would not be fraudulent. There is no evidence anywhere in the
record that any taxing authority, federal or state, on the date of the filing of the three returns in
question, finally determined the amount of income earned by the taxpayers, or the tax due thereon, for any of the years 1993 through 1995. The Board's
subsidiary finding that the federal court determined the taxpayers' federal returns to have "grossly
underreported the true amount of total income earned by over $5,500,000.00" is incorrect (Add.A39; App.97). Appellant George Schussel's federal conviction of the evasion of 1995 income tax did not include a
determination of the amount of the tax that was
underreported for that year. All that the conviction imported was a finding that "there was a substantial tax due in addition to what was shown to be due on the [1995] return" (App.48-49) .
Similarly incorrect is the finding that the appellants based their Massachusetts Non-Resident returns on the very same amounts found to be
fraudulent in the federal case (App.97-98); this because there is no evidence anywhere in the record
-that the unreported income charged in the indictment would be taxable to the appellants as Massachusetts non-residents; for example, if the unreported income were in the form of dividends.4
Finally, on the same point, there is no evidence anywhere in the record that the earned income as
reported on the three Massachusetts returns was fraudulent. To be sure, the earned income amounts reported on the three returns in question are
significantly less than would be chargeable to the appellants as federal taxpayers; but that is only
because of the rules of apportionment as shown on line 13 of each of the returns (App.22, 25, 28), where the preparer attributes 70 of a total 240 working days to Massachusetts, resulting in earned income as reported on the three returns to be only 29.17% of the total earned income that would be, and, in fact, was, reported on the federal returns.
The short of it is that comparison of the amounts reported on the three Massachusetts returns with the amounts charged in the federal indictment, or even
4 Although not in the record, it happens to be the
case that this hypothesis is the fact. The unreported income in the federal case was indeed in the form of dividends that would not be taxable to the appellants as Massachusetts non-residents.
-with the amounts resulting from the federal civil computations, proves nothing here. The Appellate Tax Board's finding that appellants "reported income amounts that were determined to be fraudulent in federal court and grossly under-reported the true amount of total income earned by over $5,500,000.00" (App.97-98) totally ignores the fact that the returns in question were non-resident returns and, more
importantly, by definition, would not include the unreported dividends that were the subject of the federal criminal case.
1. Appellants' disclosure and reliance on advice of tax professionals precludes imposing the double-tax assessment. The proliferation of statutes and
regulations has sometimes made it difficult for the average citizen to know and
comprehend the extent of the duties and obligations imposed by the tax laws. . [In] our complex tax system, uncertainty often arises even among taxpayers who
earnestly wish to follow the law, and it is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care.
Cheek v. United States, 498 U.S. 192, 199-200 and 205 (1991) (internal quotations and citations omitted); see also Commonwealth v. O'Toole, 351 Mass. 627, 642 (1967) (Spiegal, J., dissenting)("The Commonwealth
should not be permitted to range far afield in the complex area of tax law by asking questions which overtly create a definite impression that a witness had violated a tax statute when the question asked had no relevance to any issue in the case.")
The complexities and uncertainties of tax law have long been recognized by the courts, as has the average citizen's reliance on tax professionals to guide him or her as to what is or is not permissible, and what is or is not lawful.
The work of an accountant necessarily brings him into touch with rules of law which he must understand if his computations and conclusions are to stand the test of
possible litigation. Income taxes have produced a flood of judicial decisions and departmental rulings with which he must have adequate acquaintance, even though he merely works with figures and does not draft tax returns. A sharp line cannot be drawn
between the field of the lawyer and that of the accountant. Doubtless the
examination of statutes, judicial decisions, and departmental rulings, for the purpose of advising upon a question of law relative to taxation, and the rendering to a client of an opinion thereon, are likewise part of the practice of law in which only members of the bar may engage.
Lowell Bar Ass n v. Loeb, 315 Mass.
176, 182-183 (1943) (footnotes and citations omitted).
As discussed in Scagel v. Commissioner of Revenue, 13 Mass. App. Tax Bd. Rep. 38 (1990),
-disclosure of relevant facts in concert with reliance on advice of tax professionals cuts against finding that taxpayers filed false or fraudulent returns or filed returns with a willful attempt to defeat or evade a tax. (Appellants' App. Ct. Br. at 7-9) See also United States v. Boyle, 469. U.S. 241, 251 (1985) ("When an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability
exists, it is reasonable for the taxpayer to rely on that advice. Most taxpayers are not competent to discern error in the substantive advice of an
accountant or attorney. To require the taxpayer to challenge the attorney, to seek a `second opinion,' or to try to monitor counsel on the provisions of the Code himself would nullify the very purpose of seeking the advice of a presumed expert in the first place
. `Ordinary business care and prudence' do not demand such actions."); Commonwealth v. Ballou, 283 Mass. 304, 314 (1933) ("[T]he fact that the defendants consulted counsel would have a bearing on their good faith, but they must show that they made a full and frank disclosure to those whose advice they sought of all the knowledge they had touching the matter; that if, after a full disclosure of the facts, they acted
-upon the advice of persons who, they had reason to believe, were skilled in such matters, that might derogate to a considerable extent from the fact they acted corruptly [ . ] " )
McMurray v. Commissioner of Internal Revenue, 985 F.2d 36 (1st Cir. 1993) is very much in point here. In that case, unlike in the instant case, it was the
taxpayers who had the burden of proof, which in that case was to establish that their underpayment was not due to negligent or intentional violations of tax rules.
In claiming charitable deductions on their 1982 and 1985 returns for gifts of land, one parcel in 1982 and two in 1985, the taxpayers had attached to each return the report of a professional appraiser, valuing the one 1982 and two 1985 conveyances at $780,000 and $637,500, respectively. The Commissioner, on the other hand, valued the 1982 conveyance at $23,200 against the $780,000 claimed by the taxpayers and the two 1985 conveyances at a total of $41,200 against the total $637,500 claimed by the taxpayers.
Despite these wildly disparate valuations, and despite the fact that the burden of proof lay with the taxpayers, the First Circuit held that the evidence of
-reliance on professionals required a finding that the taxpayers had carried their burden of proof on the issue of statutory penalties, saying:
Tie record reflects that after being
approached by Audubon, the McMurrays sought professional advice from lawyers and
accountants, as well as an appraiser. In our view, the "bare fact" that the McMurrays attached Donovon's appraisals to support their 1982 and 1985 returns is evidence of their reliance on the appraisals. In other words, why else were they submitted with the returns, but for the fact that the McMurrays were relying on them? Finally, we note that the minimal probative value assigned by the tax court to the McMurrays' expert
opinion does not mandate a finding of bad faith or unreasonable reliance. We conclude, therefore, that the record lacks sufficient evidence of bad faith to support the tax court's negligence ruling, and
instead compels a finding that the McMurrays met their burden of proof on this issue. Id. at 42-43 (citations omitted).
Here, the appellants fully disclosed on the returns, which returns and disclosure were ~renared appellants' tax attorneys, that amounts of gross income were then the subject of an appeal and were therefore not included on the returns. (App.24, 27, 30)
Appellants do not contend, as the Commissioner suggests, that the mere fact that the returns were prepared by attorneys immunizes them from claims that
-they attempted to evade taxes. Appellants' tax
attorney, Frank W. Tessitore, who prepared the subject returns, was not just a member of the bar, but also one of the attorneys who represented the appellants before the Appellate Tax Board below. (App.l) Attorney Tessitore was, on the face of the disclosure that he prepared on the appellants' behalf, plainly conversant with the facts at the time he prepared the appellants' returns in 2007. (App.23-24, 26-27, 29-30, 31-33)
Appellants submit that, where a tax attorney prepares returns on behalf of his clients, based on his full knowledge of the relevant facts, then that, together with the explicit disclosure prepared by the tax attorney and appended to the returns, precludes the imposition of penalties based upon a failure to disclose.
A final point: The Commissioner suggested below that the appellants could have reported their full income from all sources, whether characterized as earned income or dividends, as if domiciled in Massachusetts and then filed an application for abatement mirroring the amounts shown on their Massachusetts non-resident returns as filed. This suggestion was accepted by the Appeals Court. See
-Schussel v. Commissioner of Revenue, 86 Mass. App. Ct. 419, 424 (2014) .
This proposition, however, begs two questions: (1) Would the application for abatement be any less fraudulent than the returns as filed? (2) Having in mind that the Commissioner instituted no collection action during the pendency of the administrative proceedings (the taxes were paid in full only after receipt of the Tax Amnesty Notice in February 2009), what would the Commissioner have gained by this
strategy?
B. Application of the Amnesty Program
On February 25, 2009, pursuant to Chapter 461 of the Acts of 2008 (Add.A65-A67; App.111-113) and TIR 09-3 (Add.A68-A70; App.114-116), the Commissioner issued to the taxpayers, addressed to their tax
preparers, a Tax Amnesty Notice (App.42-45), pursuant to which the Appellants made full payment (App.20).
Section IV of TIR 09-3 provides, in part, as follows
If a taxpayer qualifies for amnesty, the Commissioner will waive all unpaid penalties which could be assessed (for the applicable tax types and periods) for the failure of the taxpayer:
-2, to file proper returns which report
the full amount of the taxpayer's
liability for any tax types and for any
tax periods under G.L. c. 62C, §28.
Section 1, Para. 3, of Chapter 461 provides that the amnesty program shall not apply to any taxpayer who was "the subject of a tax-related criminal
investigation or prosecution" (Add.A65; App.111) A
similar provision is contained in Section III A 2 of
TIR 09-3. (Add.A69; App.115)
The Board ruled that the conviction of Appellant George Schussel for evasion of 1995 federal income
taxes was "a tax related criminal. prosecution"
within the meaning of Chapter 461. This ruling was error.
Chapter 461~s exclusive application to
Massachusetts taxes imposed pursuant to Massachusetts statutes is expressly affirmed by the Commissioner's
Technical Information Release ("TIR") 09-3, which
states in pertinent part:
If a taxpayer qualifies for amnesty, the Commissioner will waive all unpaid penalties which could be assessed (for the applicable tax types and periods) for the failure of the taxpayer:
i.to timely file any proper return for
any tax types and for any tax periods
under G.L. c. 62C, §§ 30, 30A, 33, 34;
-2. to file proper returns which report the full amount of the taxpayer's liability for any tax types and for any tax
periods under G.L. c. 62C, ~ 28;
3. to timely pay any tax liability under G.L. c. 62C, ~~ 33, 35, and/or G.L. c. 62B, ~ 7; or
4. to pay the proper amount of any
required estimated payment toward a tax liability under G.L. c. 62B, ~ 14.
General Laws Chapter 62C, Section 1, defines "Tax" as "any tax, excise, interest, penalty, or addition to tax imposed by this chapter or the
statutes referred to in section two." Similarly, the regulations governing assessments of Massachusetts income taxes define "Tax or Taxes" as "any tax imposed under M.G.L. chs. 60A, 62-64J, inclusive, 65B and 65C, 121A, s. 10, and 138, s. 21, and any act in addition thereto or amendment thereof, and including any
interest or penalties imposed under M.G.L. c. 62C, ss. 28, 30, 32-35." 830 CMR 62C.26.1.
Each reference to "tax" throughout Chapter 461 and TIR 09-3 is plainly a reference to Massachusetts tax; yet the Appellate Tax Board concluded, without explanation, that this one instance of the word "tax" appearing in Chapter 461 is properly defined more
-broadly than its use throughout Chapter 461, TIR 09-3, G.L. c. 62C, and 830 CMR 62C.26.1.
"Where words are used in one part of a statute in a definite sense, they should be given the same
meaning in another part of the statute." Fascione v. CNA Ins. Cos., 435 Mass. 88, 92-93 (2001), quoting Beeler v. Downey, 387 Mass. 609, 617 (1982); see also
Commonwealth v. Felt, 466 Mass. 316, 321 (2013)
("Where the Legislature uses the same words in several sections which concern the same subject matter, the
words must be presumed to have been used with the same meaning in each section."); Adams. v. City of Boston,
46-1 Mass. 602, 614 (2012) ("We also doubt the
Legislature would have employed `shall' in two
opposing senses in a two-paragraph span of the same statutory section without any explicit indication of the different meanings. Had the Legislature intended such a result, we would have expected it to use different words in the same provision, not the same word."); Mass. Care Self-Insurance Group, Inc. v. Mass. Insurers Insolvency Fund, 458 Mass. 268, 275 (2010) ("Two definitions for the same word therefore would be necessary in a single section, in
-contravention of the general rules of statutory interpretation.")
In light of Chapter 461's exclusive application to Massachusetts taxes, it would be unreasonable to interpret this one instance of the term "tax" to mean, literally, a~ tax, including, for instance,
California sales tax, Virginia meals tax, New York income tax, and even a foreign country's tax. Simply put, nothing in Chapter 461, TIR 09-3, G.L. c. 62 C, or 830 CMR 62C.26.1, refers or applies to the taxes or related criminal investigations
and prosecutions of any other sovereign, including the United States. The Massachusetts legislature could have, but chose not to, include the tax investigations
and prosecutions of other sovereigns among the grounds for
disqualification under the tax amnesty plan.
Even if this Court were to conclude that the meaning of the term "tax" as used in Chapter 461 is ambiguous, the ambiguity must be resolved against the taxing authority and in favor of the taxpayer. See Xtra, Inc. v. Commissioner
of Revenue, 380 Mass. 277, 281 (1979); Bolster v. Commissioner
of Corporations & Taxation, 319 Mass. 81, 85 (1946).
-Finally, contrary to the Board's finding that the Commissioner's issuance of the Tax Amnesty Notice was, in the first instance, inadvertent (App.61, 99), the fact is that there is no evidence to that effect
anywhere in the record. Neither the Commissioner nor
any of her representatives testified that the issuance of the Tax Amnesty Notice was erroneous nor how or why
such an erroneous issuance might have occurred.
Appellants, however, do agree that there was an error,
but the error lay not in the issuance of the Tax
Amnesty Notice, but rather in the failure to include
forgiveness of the double-tax penalty assessment in addition to the late-file and late-pay penalties.s
It follows, therefore, that, even, assuming,
contrary to fact, that the taxpayers forfeited their
rights under G.L. c. 62C, ~ 28, by filing false and
fraudulent returns, they would nevertheless be
entitled to an abatement of the double-tax assessment
under the amnesty program.
5 Perhaps the error was caused by the fact that the late-file and late-pay penalties were separately
stated, whereas the double tax penalty assessment was buried, so to speak, in the tax assessment itself; that is, the amount of the tax was doubled without any indication that it included a penalty.
-A final note: The federal criminal prosecution in question was directed only to 1995 taxes, whereas the Tax Amnesty Notice forgave penalties for the years 1993 and 1994, as well as 1995. If the federal
prosecution qualifies as a "tax-related" prosecution it can logically "relate" only to the 1995 year, and thus the Tax Amnesty Notice should stand at least with respect to the 1993 and 1994 years.
-CONCLUSION
For the foregoing reasons, Appellants
respectfully request that this Court reverse the decision of the Appellate Tax Board and order that a new decision is to be entered ruling that the
Appellants are to receive appropriate abatements of the double-tax assessment.
Of Counsel: Jason A. Kosow BBO No. 644701 Dated: February 3, 2015 Respectfully submitted, Francis J. D'Mento BBO No. 1250 0 DzMENTO & SULLIVAN 7 Faneuil Marketplace Boston, MA 02109-6113 (617) 523-2345
Attorney for the Appellants
-CERTIFICATION PURSUANT TO
MASSACHUSETTS RULE OF APPELLATE PROCEDURE 16 (k)
I hereby certify that, to the best of my
knowledge, this brief complies with the Massachusetts Rules of Appellate Procedure that pertain to the
filing of briefs.
Dated: February 3, 2015
Francis J. D"Mento BBO No. 1250 0 DzMENTO & SULLIVAN 7 Faneuil Marketplace Boston, MA 02109-6113 (617) 523-2345
-ADDENDUM TABLE OF CONTENTS
Page DECISION BELOW
Appellate Tax Board Findings of Fact and Report
Promulgated March 4, 2013 ... Al
CITED LAWS, REGULATIONS and TIRs
General Laws Chapter 62C, Section 26 ... A46
General Laws Chapter 62C, Section 28 ... A49
830 Code Mass. Regs. ~ 62C.26.1 ... A50
Session Law Chapter 461 of the Acts of 2008: An Act Relative to the Establishment of a Tax
Amnesty Program by the Commissioner of Revenue... A65
Department of Revenue Technical Information Release (TIR) 09-3: Limited Amnesty Program For Individual
COMMONWEALTH OF MASSACHUSETTS APPELLATE TAX BOARD
GEORGE & SANDRA SCHUSSEL v. COMMISSIONER OF REVENUE
Docket No. C298869 Promulgated:
March 4, 2013
This is an appeal filed under the formal procedure pursuant to G.L. c. 58A, ~ 7 and G.L. c. 62C, ~ 39(c) from the refusal of the appellee, Commissioner of Revenue ("Commissioner"), to grant an abatement of personal income taxes assessed to George and Sandra Schussel ("appellants"), for the calendar years 1993 through 1995 ("tax years at issue").
Commissioner Scharaffa heard this appeal and was joined by Chairman Hammond and Commissioners Rose, Mulhern and Chmielinski in a decision for the appellee.
The findings of fact and report are made pursuant to requests by the appellants and the appellee under G.L. c. 58A, ~ 13 and 831 CMR 1.32.
Francis J. DiMento, Esq. and Frank W. Tessitore, Esq. for the appellants.
Celine E. Jackson, Esq. and Andrew M. Zaikis, Esq. for the appellee.
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FINDINGS OF FACT .AND REPORT
On the basis of an Agreed Statement of Facts, a Supplemental Agreed Statement of Facts and the testimony and exhibits offered into evidence at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
On May 15, 2007, the Commissioner issued to the appellants a Notice of Failure to File pertaining to income tax returns for the tax years at issue. On June 19, 2007, the appellants filed a Massachusetts Nonresident Income Tax Return (~~Form 1 - NR") for each tax year at issue and they paid the amounts of tax which they reported to be due. By Notice of Assessment ("NOA") dated June 27, 2007, the Commissioner assessed amounts of interest and penalty for the tax years at issue, based on the amounts shown on the appellants' returns. The appellants paid those amounts. However, based on information that subsequently arose from the criminal indictment of George Schussel, the Commissioner made subsequent assessments of additional taxes, interest and penalties by NOA dated August 7, 2007. That NOA also included double-assessment penalties pursuant to G.L. c. 62C, ~ 28.
By Application for Abatement/Amended Return (Form CA-6) filed on February 21, 2008, the appellants sought abatement of the additional taxes, interest and penalties relating to the
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August 7, 2007 NOA. On October 10, 2008, the Commissioner issued a Notice of Abatement Determination
denying the appellants' abatement request. On
December 8, 2008, the appellants filed a Petition Under Formal Procedure with the Board.
On the basis of these facts, the Board found and ruled that it had jurisdiction over the instant appeal.
The appellants were also the subject of a federal tax audit.
Based on information shared by the Internal Revenue Service ("IRS"), specifically the information contained in IRS Letter 692 and Form 4549-A, which were issued on January 20, 2009, subsequent to the filing of this appeal, the Commissioner again adjusted the appellants' taxable incomes to reflect the adjustments made by the IRS.
On February 25, 2009, the Commissioner inadvertently issued to the appellants a Tax Amnesty Notice.1 The Tax Amnesty Notice offered the appellants a waiver of unpaid penalties if they paid the Amnesty Balance Due in full by the deadline of April 30, 2009.
Pursuant to the Tax Amnesty Notice, the appellants made full payment of the outstanding tax liability that was listed on the Tax ~rrulesty Notice. According to the Tax Amnesty Notice, the appellants benefitted from an Amnesty Savings of penalties assessed under G.L. c. 62C, ~ 33. The appellants, however,
1 As will be detailed below, the Amnesty Program was not available to
Mr. Schussel, because he was the subject of a tax-related criminal
investigation or prosecution.
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contend that they should have been offered amnesty for the double-assessment penalties as well.
The parties stipulated that the following are the amounts of personal income taxes and double-assessment penalties at issue if the appellants are found to have been Massachusetts residents during the tax years at issue, not including interest:
Tax year Amount of personal income tax at issue Double-assessment penalties 1993 $ 98,871.69 $197,743.37 1994 $140,111.61 $280,223.22 1995 $198,841.15 $397,682.29 TOTAL: $437,824.45 $875,648.89 Background information.
George Schussel ("Mr. Schussel") was born as a British
citizen in Nice, France in 1941. He immigrated to the United
States at the age of 2, and as a young child, he lived in
various places within the United States and Mexico. After
receiving his Bachelor's Degree from the University of
California in 1961, Mr. Schussel attended graduate school in Massachusetts at Harvard University, where he earned a Master's Degree and then a Ph.D. in 1966.
Sandra Schussel ("Mrs. Schussel") was born and raised in
Lynn, Massachusetts. She attended the Peter Bent Brigham
Hospital nursing school in Boston, Massachusetts and graduated
in 1962. She practiced as a registered nurse at The Children's
Hospital in Boston, but after six months, she left and began
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working for American Airlines as a flight attendant, starting in 1963.
The appellants met on an airplane in 1964 and married the following year in 1965. They lived in Cambridge, Massachusetts while George completed his education. As Mr. Schussel gained employment, the couple subsequently moved, first to southern California, then to Alabama and then to New Jersey. The appellants' first daughter, Stacey, was born in 1970 in New Jersey.
In her testimony before the Board, Mrs. Schussel explained that, after the birth of their first child, it became more important for them to be near family. Later that same year, Mr. Schussel secured a job at American Mutual Insurance Company ("American Mutual") in Wakefield, Massachusetts, and the appellants moved back to Massachusetts.
In 1971, shortly after moving to Massachusetts, the appellants purchased a home at 3 Durham Drive in Lynnfield. Mr. Schussel testified that Lynnfield was the perfect location for his family for a number of reasons, including: a good school system; proximity to his mother-in-law's Polish community of Salem, Massachusetts; a strong labor pool for his business; and easy access to Logan International Airport in Boston.
Mr. Schussel testified that he had been "moonlighting" teaching seminars during his employment with American Mutual, and he eventually left American Mutual to pursue this endeavor
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full-time. In 1979, Mr. Schussel founded his own company, Digital Consulting, Inc. ("DCI") which he incorporated in Massachusetts. He originally operated DCI from the basement of the appellants' home in Lynnfield, but he subsequently moved the operation to an office located in Andover, Massachusetts during the tax years at issue. DCI organized, promoted and conducted trade shows and conferences, which were designed to teach attendees about the latest technology advancements and how to utilize new technologies to solve business and government problems. DCI held events in major cities in the United States and in foreign countries.
The appellants' physical presence in Massachusetts.
At the hearing of this appeal, Mr. Schussel testified that during the tax years at issue, he was in Massachusetts on average about 70 days a year, with 95 days a year traveling for business, 80 days a year in Florida and 120 days a year in New Hampshire. However, at his earlier deposition, Mr. Schussel testified that he was in Massachusetts for about a third of each year, approximately 120 days. Either way, the evidence did not establish that Mr. Schussel spent at least 183 days in Massachusetts so as to cause him to be treated as a Massachusetts resident. See G.L. c. 62, ~ 1(f). Therefore, the question of the appellants' residency turned on whether he was
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domiciled in Massachusetts during the tax years at issue, based on the facts and circumstances.
The appellants' family relationships.
The appellants both testified that a major turning point in their lives occurred in 1979, when Mrs. Schussel's father passed away. Mr. Schussel testified that, after this event, his mother-in-law, Harriet Kudzi ("Mrs. Kudzi"), "wanted to live with us and did better living with us than by herself," and Mrs. Schussel likewise testified that "living on her own would have been really tough." Mr. Schussel also testified that at about the same time, Mrs. Schussel decided that the appellants should have a nicer, more spacious home in Lynnfield. Mrs. Kudzi sold her home, contributed her life's savings to the appellants, and the appellants built a house at 5 Kimberly Terrace in Lynnfield. The home at Kimberly Terrace was completed in 1980 and the appellants and their two young daughters, Stacey and Jennifer, together with Mrs. Kudzi, moved into the home. Mr. Schussel testified that Mrs. Kudzi took care of the appellants' children while Mrs. Schussel helped him build the business of DCI. Mrs. Kudzi continued to live at the Kimberly Terrace home during the tax years at issue and until her death in 2010. Mr. Schussel testified consistently that the appellants "took care of [Mrs. Kudzi] for the rest of her life."
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In her testimony, however, Mrs. Schussel attempted to
create distance between herself and her mother. She testified
that, once her daughters were out of the house, she began spending more time in New Hampshire, "just because it was more comfortable for my mother and it was more comfortable for me,
and it was more comfortable for George." The appellants thus
portrayed Mrs. Kudzi as .living alone in the Lynnfield home,
claiming that she was self-sufficient and that it was
Mr. Schussel who would check in on her, generally on Tuesday
evenings after work. However, there were inconsistencies in
their testimonies, as Mrs. Schussel later admitted that she would also stay with her mother, particularly when she needed to take her to a doctor's appointment as "she was getting older." Moreover, a sentencing memorandum submitted to the United States District Court for the District of Massachusetts, regarding Mr. Schussel's 2007 criminal conviction for federal tax evasion,
contains this statement from Mrs. Kudzi: "I have lived with
George and Sandy, my daughter, for 28 years, having moved into
their home shortly after being widowed. How many son-in-laws
would willingly, happily, take their mother-in-law into their own homes to share their living room, kitchen, and life with for several decades."
Mrs. Schussel testified that Mrs. Kudzi did not often
venture up to New Hampshire. She explained that her mother did
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not like to visit there in part because Mrs. Kudzi "was a person that liked to stay put," but also because New Hampshire harbored many sad memories for Mrs. Kudzi, particularly regarding Mrs. Kudzi's deceased husband.
The appellants' two daughters, Stacey Schussel Griffin
and Jennifer Schussel Storer, both attended Lynnfield schools, including Lynnfield High School, from which they graduated in 1987 and 1990, respectively. Stacey and Jennifer both attended college and graduate school in Massachusetts. Stacey Schussel Griffin was married in 1991 and during the tax years at issue, she lived with her husband in a home in Lynnfield.
The appellants had assisted Stacey and her husband in purchasing their Lynnfield home.
Stacey testified at the hearing of this appeal that she never possessed a New Hampshire driver's license.
Jennifer Schussel Storer lived on a college campus in Massachusetts until her graduation in 1994.
Upon graduation, she taught for a year at a school in Mount Hermon, Massachusetts, and she then moved back to her parent's Lynnfield home. In 1996, Jennifer and her husband purchased the home that was then owned by Stacey and her husband, with financial assistance from the appellants.
During the tax years at issue, Mr. Schussel's mother and brother (until 1994 when he passed away) lived in France.
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Mrs. Schussel's family members were settled on the ~~North
Shore," in Lynn and Salem, during the tax years at issue, and none of the appellants' family members lived in New Hampshire.
The appellants' Lynnfield home and other Massachusetts properties.
During the tax years at issue, the appellants continued to own and occupy their family home on Kimberly Terrace in Lynnfield. The home originally had four bedrooms. During the
tax years at issue, Stacey was married and lived with her husband in their home. Jennifer finished college, then lived and worked in Mount Hermon, Massachusetts, came back to live briefly at Kimberly Terrace, and then she left home to live with her new husband. Since the two daughters were no longer living at the appellants' home, the appellants had their two bedrooms combined into a larger bedroom for Mrs. Schussel's mother, Mrs. Kudzi. During the tax years at issue, the assessed value of the Kimberly Terrace property was $346,820.00.
The appellants also owned other Massachusetts properties during the tax years at issue. The appellants owned Lot 2AA, Hillside Road in North Andover, which they had purchased in 1986. The appellants also possessed an ownership interest in the Marland Mill Building, a 30,000 square foot mill located at 204 Andover Street in Andover, which served as the offices of
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DCI, through their wholly-owned corporation, Jellicle Investors, Inc. ("Jellicle"), a New Hampshire corporation registered to do business in Massachusetts, of which the appellants were the sole owners.
The appellants' New Hampshire properties.
Mrs. Schussel testified that, during the early days of their marriage, she knew that her husband had been looking for employment opportunities in California and seemed to be putting more effort into the resumes and cover letters sent to the California prospects than to those in Massachusetts. Mrs. Schussel testified that she believed that introducing Mr. Schussel to the beauties of New Hampshire's great outdoors would be her only chance of keeping him in the New England area. Therefore, she surreptitiously planned the purchase of a recreation home in New Hampshire by bringing her husband on a weekend trip to visit some friends who had a camp there. Both appellants were passionate about outdoor recreational activities, including boating, skiing, hiking and motorcycling. Mrs. Schussel's plan worked, and as Mr. Schussel testified, he "fell in love" with New Hampshire. During 1974, while the appellants were living on Durham Drive in Lynnfield, they purchased what Mr. Schussel called a "recreation property," a small cabin in Meredith, New Hampshire with about 100 feet of
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frontage on Lake Winnipesaukee. Mr. Schussel testified that during his years spent working at American Mutual, he considered the New Hampshire home to be a "vacation venue" for the family, where he and his family would spend weekends, vacations and
holidays, engaging in the sorts of outdoor recreational
activities that they loved.
Over time, however, Mr. Schussel became more interested in
purchasing "investment" property. In 1977, he discovered an
opportunity to purchase 125 acres with almost two miles of
frontage on Lake Winnipesaukee. Despite a disagreement with his
wife over the purchase, Mr. Schussel purchased 102 acres of this
property in 1977. He explained that once Mrs. Schussel agreed
and signed on to the joint tenancy, the appellants began to develop the property, raising money for the construction by selling off about seven acres of the property.
The appellants began construction on what became their New Hampshire residence in 1979, and the house was ready for the
appellants to occupy by 1980. Mrs. Schussel testified that a
"new wing" was also constructed for the house sometime during
the tax years at issue. The Meredith, New Hampshire residence
was a six-bedroom, six-bathroom dwelling, spacious enough to accommodate large family gatherings and able to comfortably house the appellants and their two daughters and their families
during holidays and other family gatherings. During the tax
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years at issue, the family continued to spend their recreation time at the Meredith residence, including weekends, holidays and vacations.
Mr. Schussel also testified, however, that while their Meredith residence was winterized, they nonetheless closed portions of it for winter by draining water from all but the first floor bedrooms, the laundry room, kitchen and living area, stating, "[w]e shut down portions of it for sure."
Mr. Schussel explained that the appellants noticed that, while their New Hampshire home was beautiful and modern, their Durham Drive home in Lynnfield was not. He testified that the development of a spacious vacation home was at least part of the appellants' motivation to purchase "something a little nicer" in Lynnfield, and this decision happened to coincide with the death of Mrs. Schussel's father and the decision to have Mrs. Kudzi move in with the appellants.
In addition to the Meredith residence, the appellants also purchased investment property in Meredith, New Hampshire on Powers Road, which they subsequently sold for a profit, and additional properties that they called "conservation" properties, consisting mainly of wetlands.
Mr. Schussel explained that the appellants entered into an agreement with the state of New Hampshire not to develop the land and, in return, they obtained a lower property tax rate for that property.
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The appellants enjoyed many recreational activities at their Meredith residence, as indicated by their registration of recreational vehicles there, including a Porsche convertible, two Honda three-wheel OHRVs, two Ford Ranger trucks, motorcycles, and boats. Mr. Schussel testified that the appellants also spent their holidays in New Hampshire, and that they hosted two wedding receptions at the home, one in 1986 for the daughter of Mrs. Schussel's cousin and one in 1991 for their daughter, Stacey. In 1996, their daughter, Jennifer, had her wedding reception at another residence owned by the appellants, located in Key West, Florida.
The appellants' business ties.
Starting at or near its inception in 1980, Mrs. Schussel helped Mr. Schussel run DCI. Mrs. Schussel testified that she never received a salary from DCI, but from the beginning, in addition to running DCI with Mr. Schussel, Mrs. Schussel travelled with him to some of the DCI events. While Mrs. Schussel was traveling or otherwise away from home working for DCI, Mrs. Schussel's mother, who was living with the family, took care of the appellants' two daughters in the Lynnfield home. After the daughters matured and graduated college, Stacey took a job at DCI where she met her husband, who was also an employee of DCI. Stacey's duties included editing a DCI
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newsletter known as The Downsizing Journal, and Mrs. Schussel assisted her with this task. Mrs. Schussel testified that during the tax years at issue, she often traveled extensively for DCI, but that she came to the DCI offices in Andover to work with Stacey on The Downsizing Journal.
Mrs. Schussel testified that, in her mind, a shift in domicile occurred for her on September 21, 1992 when Mr. Schussel appointed a fellow DCI executive, Ron Gomes, to replace him as president of DCI and Mr. Schussel became the Chairman. Mr. Schussel testified that in his capacity as Chairman, he chaired two annual events held by DCI, conducted research in Silicon Valley in California, traveled around the world with his database work, and published The Downsizing Journal. Mr. Schussel attempted to portray himself as the absent figurehead, offering into evidence a copy of a portrait of himself, given to him as a gift that hung in his DCI office, which included the caption: "Our father who art in New Hampshire." However, by all accounts, even after his appointment as Chairman, Mr. Schussel was very dedicated and spent a great deal of time building his self-made business. When asked how many days he spent in Massachusetts, Mr. Schussel testified: ~~If I was in the State of Massachusetts, I was probably in the office. That would include- weekends. For me, seven days is seven days. It isn't like Sunday is a day of rest
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or Saturday is the Sabbath." Mrs. Schussel's testimony
corroborated Mr. Schussel's dedicated work ethic and his
tendency to come to the Andover office, even when he was
traveling extensively: "Seriously, he works. He went back and
forth [to the Massachusetts office] a lot."
Mr. Schussel testified that during the tax years at issue, he was traveling for business extensively during the year, but he reduced his travel in the summers so as to spend time in New
Hampshire. He testified that Mrs. Schussel was living full-time
in New Hampshire in the summer, and typically he would be the one to check in on Mrs. Kudzi at the Lynnfield home, spend Tuesday night there, work a half-day at the Andover office the next day and then return to New Hampshire by early Wednesday
afternoon. When asked if she checked in on her aging mother,
Mrs. Schussel testified that, during the summer, she would come to Lynnfield once a week, but not every week, to check in on Mrs. Kudzi, "to make sure that she had any doctor's plans or anything like that at those times when I would come down," and
also to help her daughter, Stacey, with The Downsizing Journal.
In addition, appellants were the sole owners of Jellicle, a corporation that owned the Andover property occupied by DCI and received rental income from DCI in each of the tax years at issue.
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The appellants' friendships and social lives.
Mr. Schuss.el testified that the appellants entertained in New Hampshire but not in Massachusetts, and that they engaged in various recreation activities in New Hampshire. By contrast, Mr. Schussel explained that Massachusetts was "where I work, it's my office." Mr. Schussel further testified that the appellants had social friends only in New Hampshire, including the Billingses, the Smiths, Chuck Thorndike, the Currans, the Melansons, the Versards, and the Reisters. Mr. Schussel admitted, however, that the Reisters were actually from Lynnfield and that Mrs. Schussel knew John Curran from their childhood upbringing in Lynn, Massachusetts; Mr. Schussel also admitted ghat the Melansons were friends from Lynnfield but he characterized their friendship as hosting weekend visits for them at their Meredith, New Hampshire residence or "meet[ing] them for dinner somewhere in the lakes region." 'The appellants did not call any of their friends to testify at the hearing of this appeal.
The appellants' miscellaneous connections.
Mr. Schussel testified that, after the completion of the New Hampshire home in 1980, he went into the Meredith Town Hall and "declared myself a New Hampshire resident and always thought of myself that way." Mrs. Schussel testified, however, that
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their decision was made much later, when Mr. Schussel appointed
Ron Gomes to be president of DCI towards the end of 1992. She
later testified vaguely, however, that their change in domicile was "a very fluid decision."
During the tax, years at issue, both appellants were
registered to vote in Lynnfield.. At the hearing of this appeal,
Mr. Schussel acknowledged, when reminded of his deposition testimony, that he had been present in Massachusetts "at least once" during the tax years at issue to vote in an election. Mrs. Schussel testified that she was not registered to vote in New Hampshire during the tax years at issue.
On October 24, 1994, Mr. Schussel made a $500.00
contribution to the Romney for US Senate Committee. He listed
his address on the contribution as Kimberly Terrace in
Lynnfield. When asked at the hearing why he used his
Massachusetts address, Mr. Schussel testified that Mr. Romney had paid a visit to DCI's Andover office, representing Bain Capital, at which time Mr. Schussel made the contribution.
During the tax years at issue, both appellants maintained
and renewed their Massachusetts driver's licenses; Mr. Schussel renewed his on January 20, 1994 and Mrs. Schussel renewed hers
on June 22, 1994. Mr. Schussel was also issued a New Hampshire
driver's license on October 27, 1994. Mrs. Schussel never
obtained a New Hampshire driver's license during the tax years
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at issue, nor did either of the appellants' daughters, Stacey or Jennifer. Also during the tax years at issue, both of the appellants' frequently used vehicles, namely the Volkswagen and the Audi, were registered in Massachusetts.
Also during the tax years at issue, the appellants maintained two bank accounts, one at Fidelity Investment in Boston and one at the Wakefield Co-operative Bank in Wakefield, Massachusetts. When asked at the hearing why the appellants continued to maintain these Massachusetts-based bank accounts, Mr. Schussel testified that he did not actively bank at the Wakefield bank. At any rate, he testified that, in his opinion, "banking is global," particularly with the ability to write checks and receive money from a national automatic teller machine, and therefore, he did not see the need to open and transfer his funds to a New Hampshire-based bank.
Finally, Mr. Schussel testified that the appellants had chosen their burial plot to be on the grounds of their New Hampshire home, but he did not testify when they had made this decision. The appellants also entered into evidence a photocopied photograph of a large wooden trellis, which Mrs. Schussel explained was a replica of one that had been built by her grandfather and erected at her grandparents' home in New Hampshire. She explained that this replica trellis had been a gift from the DCI employees, including her daughter, Stacey, on
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the occasion of her fiftieth birthday and that she had chosen to have it installed at the appellants' New Hampshire home.
The appellants' tax filings and Mr. Schussel's criminal
conviction for federal tax evasion.
On February 26, 2004, Mr. Schussel was indicted in the United States District Court, District of Massachusetts, on one
count of conspiracy and two counts of tax evasion. The
conspiracy charge related to Mr. Schussel's activities between January, 1988 and May, 1998, thus including the tax years at
issue. On January 25, 2007, Mr. Schussel was found guilty on
all three counts, which related to his activities at DCI and to
his filings of personal income tax returns. In particular,
Mr. Schussel was found guilty of filing a false and fraudulent United States Individual Income Tax Return for tax year 1995
with the IRS. On his 1995 federal tax return, Mr. Schussel
reported taxable income of $1,030,785.00, when in fact his
taxable income was found to be $3,341,868.00. Mr. Schussel
served a prison sentence and was released from custody on supervised release, managed by the Federal Probation Office in Massachusetts..
According to the Commissioner's records, the appellants did not file any personal income tax returns with Massachusetts from calendar year 1989 forward, until the Commissioner issued the
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Notice for Failure to File on May 15, 2007.2 The appellants then filed their Massachusetts returns 'for the tax years at issue with the Commissioner on June 19, 2007, after Mr. Schussel was found guilty of tax fraud. The appellants filed returns that reported income amounts that included the 1995 amount which the United States District Court had found to be fraudulent, with a total under-reported amount of $5,558,736.00 for the three tax
years at issue. The Commissioner applied the double-assessment,
immediate assessment and jeopardy assessment provisions of
G.L. c. 62C, ~~ 28, 26(d) and 29 against the appellants on January 20, 2009.
The Board's ultimate findings of fact for domicile.
The Board found that the appellants were not
credible witnesses. The appellants offered inconsistent and
contradictory testimony concerning their contact with their Lynnfield home and with Mrs. Schussel's mother, Mrs. Kudzi. On the one hand, they stated that Mrs. Kudzi was independent and they attempted to portray a somewhat tense relationship between Mrs. Schussel and her mother as the reason why it was just "more comfortable" for the appellants to live in New Hampshire and to
2 Moreover, despite their claim that they were New Hampshire residents, the appellants never filed any interest/dividend tax returns with New Hampshire.
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leave the Lynnfield home for Mrs. Kudzi. However, they both unequivocally stated that Mrs. Kudzi did not want to live alone
after being widowed, that she gave her entire life' s savings to
the appellants with the understanding that they would provide a home for her with them in Lynnfield, and that living on her own "wouldn't have been a good situation." More to the point, their
portrayal of their relationship with Mrs. Kudzi changed
depending on the forum: in the sentencing memorandum for
Mr. Schussel's federal criminal conviction, the appellants
readily portrayed themselves as devoted to Mrs. Kudzi, whom they characterized as getting along in years and requiring doctors' appointments, but in these proceedings they contended that
Mrs . Kudzi was able to live on her own, aside from brief
check-ins from her son-in-law. Moreover, the testimony as to how
frequently Mrs. Schussel looked in on her mother was vague and contradictory; at one point, she testified that she checked in weekly, but then retracted and claimed to have left the check-ins for her husband.
With respect to Mr. Schussel's supposed declaration of domicile in 1980 at the Town Hall in Meredith, New Hampshire, the Board found that testimony to be vague and unsubstantiated, as Mr. Schussel did not explain what he actually did to sever domicile in Massachusetts and to create a new domicile in New
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Hampshire, particularly while he was still enrolling his children in Lynnfield public schools at that time.
Further, appellants' testimony concerning their lack of
personal ties to Massachusetts lacked credibility. The
appellants had strong family ties in Lynnfield, including not only Mrs. Kudzi but also both of their daughters and their
respective families. Moreover, appellants' testimony that they
only socialized with the Reisters and Melansons, who were also from Lynnfield, exclusively in New Hampshire lacked credibility and was not substantiated.
Mr. Schussel's conviction for federal tax evasion, together
with the fact that the appellants failed to file any
Massachusetts returns, despite working in Andover for a
Massachusetts company, until they received the Notice of Failure
to File, seriously undercut his credibility. Moreover, when
they did file returns subsequent to that notice, the appellants reported only those amounts that were later found by the federal court to be a gross understatement of their actual taxable income.
A comparison of the appellants' Massachusetts and New Hampshire ties reveals that the center of the appellants' domestic, social, civic and business lives was in Massachusetts. On the New Hampshire side, the appellants spent much of their
recreation time in New Hampshire, which offered the appellants
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