### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 20-1306
S AMUEL W EGBREIT and E LIZABETH J. W EGBREIT , Petitioners -Appellants ,

v.

C OMMISSIONER OF I NTERNAL R EVENUE , Respondent -Appellee

.

____________________ Appeal from the United States Tax Court

. No. 7109

- 13 — Mary Ann Cohen , Judge

.

____________________
A RGUED D ECEMBER 7, 2020

— D ECEMBER 29, 2021

____________________

Before S YKES , C hief Judge , and B RENNAN and S T

. E VE , Circuit Judges

. S YKES , Chief Judge

. Samuel and Elizabeth Wegbreit sheltered several million dollars of income in a life

- insurance policy held by a sham trust. The IRS caught on to the Wegbreits’ scheme and issued a deficiency notice showing that they owed millions in back taxes. T he Wegbreits challenged the notice in the t ax c ourt. After d iscovery revealed a series of suspicious documents and transactions relating to the Wegbreits’ finances, the IRS added civil fraud2 No. 20-1306

allegations . The tax c ourt agreed with the IRS, finding that the Wegbreits underreported their income by nearly $15 million and engaged in a pattern of conduct intended to defraud the government. We affirm. The Wegbreits’ rambling brief spans 78 pages yet somehow develops only two coherent arguments remotely re lated to the tax c ourt’s decision. And those two arguments are baseless : t he Wegbreits stipulated them away in the tax c ourt. We therefore order John E. Rogers, the Wegbreits’ attorney, to show cause why he should not be sanctioned under Rule 38 for filing this frivolous appeal. I. Background Samuel Wegbreit founded and served as an executive of Oak Ridge, LLC, a financial

- services company. In 2003 a s his interest in Oak Ridge gained value, Samuel worked with Thomas Agresti, his attorney, to reduce his tax liability

. Agresti proposed that Samuel transfer his Oak Ridge interest to a trust benefitting his wife, Elizabeth , and the couple’s children. W ith Agresti as trustee, the trust would in turn convey the Oak Ridge interest to an offshore insurance compa ny as an initial premium for a life

- insurance policy benefitting the trust. Samuel agreed to Agresti’s scheme without conducting any research or seeking independent legal advice.
The record includes three versions of the Samuel Wegbreit Trust Fund agreemen t , with suspicious differences between them . Most notably, two of the agreements identify only $18,750 in cash as initial trust assets, but the third also lists an insurance policy issued by Acadia Life Ltd.

— a policy that was not issued by Acadia until 200 4, the year after theNo. 20-1306 3

trust was formed. Another oddity is worth mentioning . O ne of the documents declares that it is restating the trust agreement dated January 25, 2002, over a year before Samuel even met with Agresti. N o one could produce the purported 2 002 agreement , nor could t he Wegbreits explain why there were multiple trust agreements, the discrepancies between them, or which was operative. Agresti, acting as trustee, acquired a variable life

insurance policy from Threshold Alliance, Ltd. 1 Although nominally based in the Cook Islands, Threshold shares a United States office with Agresti’s law firm. The policy lists its issuance date as January 25, 2002

— the same day the mysterious 2002 trust agreement was supposedly executed

— and states that coverage d oes not start until the first premium is paid. As the initial premium payment, Samuel transferred his Oak Ridge interest to the trust, which it in turn conveyed to Threshold

. Threshold’s supposed policy administrator , however, denie s signing the transfer documents and ever working for the company.
In 2004 Agresti swapped the Threshold policy for the one issued by Bermuda

- based Acadia Life Ltd. At the time of the exchange , ove r 80% of the Threshold policy’s value consisted of Samuel’s Oak Ridge interest. The remainder was comprised of interests in shell companies organized and run by Agresti and his associates

.

1 Variable life

- insurance policies split premiums between a cash account and an investment account, and thus provide an investment vehicle. See generally Norem v. Lincoln Benefit Life Co. , 737 F.3d 1145, 1147 (7th Cir. 2013).4 No. 20-1306

The Wegbreits leveraged the insurance policies for their personal b enefit in two ways. First, the shell companies made expensive purchase s, including show horses and several Florida condominiums , on the Wegbreits’ behalf

. Second, the Wegbreits regularly requested policy loans from Acadia on behalf of the family trust, whi ch would in turn deposit the money in to a bank account in Samuel’s name. Between 2004 and 2008, the Wegbreits received over $3 million in policy loans , none of which they reported as taxable income. The big gest payoff came when Acadia, at Samuel’s directio n, sold his Oak Ridge interest to an investment firm for $11.3 million. Although the purchase agreement was finalized in 2004, the Wegbreits stipulated in the t ax c ourt that the sale occurred in January 2005 , and the record shows that the money changed han ds later tha t month

. Because t he proceeds were wired directly to Agresti, who passed them on to Acadia , t he Wegbreits did not report any taxable income from the sale.
After a 2008 audit, the IRS determined that the trust in come and Acadia policy gains , including those from the Oak Ridge sale, were taxable to the Wegbreits. In total the y underreported their income from 2005 to 2009 by nearly $15 million. The Wegbreits disputed the I RS’s conclusion in the tax c ourt. After discovery revealed the s uspicious documents related to the trust and life

- insurance policies, the Commissioner of Internal Revenue amended his answer
to assert civil fraud penalties.
After trial the t ax c ourt found t hat Samuel never effectively transferred his Oak Ridge interest to the trust

. The rest of the tax scheme collapsed from there

. Without theNo. 20-1306 5

Oak Ridge interest, the trust never paid the initial premium for the Threshold policy

— a condition to its issuance

— and Agresti could not exchange the invalid Threshold policy for the Acadia policy. The judge additionally found that the trust was a sham lacking economic substance and thus should be disregarded for tax purposes. With the trust and insurance policies out of the way, the judge agreed with the Commissioner’s assessment of the Wegbreits’ tax liability. She also imposed fraud penalties, noting that the record displayed several indications of fraud, including false and misleading documents and failure to cooperate with tax authorities

. II. Discussion
We review the tax c ourt’s legal conclusions de novo and its factual findings for clear error. Cole v. Comm’r , 637 F.3d 767, 773 (7th Cir. 2011 ). We also presume that t he Commissioner’s assessment of a tax deficiency is correct

. Id. T o shift the burden to the Commissioner, the taxpayer must showthat the assessment “lacks a rational foundation or is arbitrary and excessive.” Id. (quotation marks omitted). Although “[t]he purpose of an appeal is to evaluate the reasoning and result reached by the” court below, Jaworski v. Master Hand Contractors, Inc. , 882 F.3d 686, 690 (7th Cir. 2018), t he Wegbreits raise a bevy of legal topics wholly irrelevant t o the t ax c ourt’s decision , from statutory

diversification rules for life

- insurance portfolios to the grantor

- trust doctrine. When the y do address germane issues, th eir brief flagrantly violate s Rule 28 ’s requirement to support each argument “with citations to the authorities and parts of the record on which [they rely ].” F ED

. R. A PP

. P. 28(a)(8)(A). As just a sample, the brief cite s a 489

- page6 No. 20-1306

insurance treatise

— all of it

— in support of a single proposition and the “entire record” in support o f another. No twithstanding this general incoherence , we can discern two contested issues on which the Wegbreits’ brief satisfies the bare minimum of Rule 28: the date of the sale of Samuel’s Oak Ridge shares, and the Commissioner’s compliance with 26 U.S.C. § 6751 in seeking fraud penalties. T he balance of the Wegbreits’ conclusory arguments are waived. See, e .g. , Cole , 637 F.3d at 773.
A. Oak Ridge Sale Date
The Internal Revenue Code states that “[t] he amount of any item of gross income shall be included in the grossincome for the taxable year in which received by the taxpayer ,” unless the taxpayer’s accounting method permits otherwise. 26 U.S.C. § 451(a). The Wegbreits maintain that the Commissioner i s barred by the statute of limitations from assessing any back taxes based on 2004 income, see id. § 6501(a), and that because the Oak Ridge sale was consummated in 2004, the proceeds are taxable income for 2004.
The flaws in th is argument are numerous. Mo st obviously , the Wegbreits stipulated below that the sale occurred on January 1, 2005. They ask us to release them from this stipulation, but they never made such a request to the t ax c ourt

. That’s a waive r

. See Soo Line R.R. Co. v. Consolidated Rail Corp

. , 965 F.3d 596, 601 (7th Cir. 2020). Moreover, their request to undo the stipulation consists of an utterly undeveloped assertion that the date of a sale is a legal conclusion that cannot be conceded . That’s a double waiver. See Shipley v. Chi. Bd. of Ele ction Comm’rs , 947 F.3d 1056, 1063 (7th Cir. 2020) (undeveloped , cursory arguments are waived). And the assertion is wrong : T he date of a sale is aNo. 20-1306 7

question of fact (or at least a mixed question of fact and law) , Williams v. Comm’r , 1 F.3d 502, 505 (7th Cir. 1993), and thus fair game for stipulation , T AX C T

. R. 91(a) (permitting stipulation of a fact or an application of law to a fact). In any event, the Wegbreits ’ a rgument is factually baseless because the evidence unambiguously shows , and the Wegbreits concede, that the funds were received in January 2005. I n a single conclusory sentence, the Wegbreits assert that Acadia is an “accrual base” taxpayer permitted to re port the sale proceeds as 2004 income , see 26 U.S.C. § 451(b)(1)(A), but this unsupported, cursory argument is waived too , Shipley , 947 F.3d at 1063. In yet another woeful failure to grapple with the tax c ourt’s decision, the Wegbreits also do not explain why Acadia’s accounting method matters since the judge found that the Acadia policy was never valid and the trust purportedly holding the policy was a sham.

B. Compliance with § 6751
With a few exceptions, the IRS may not assess any penalty “unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secreta ry may designate.” § 6751(b)(1). The Wegbreits insist that we must vacate the t ax

c ourt’s fraud penalty because the Commissioner did not comply with § 6751.
A s with the Oak Ridge sale date, the Wegbreits’ stipulations in the tax c ourt foreclose this argume nt. They agreed both to the factual basis for the Commissioner’s compliance with § 6751 and to the ultimate conclusion: T he Commissioner “ complied with the written approval8 No. 20-1306

requirement under ... § 6751(b)(1).” Their attempts to skirt this unequivocal stipula tion are perfunctory and raised for the first time on appeal. Either constitutes a waiver. Soo Line , 965 F.3d at 601.

C. Sanctions Rule 38 permits us to impose sanctions for frivolous appeals. F ED

. R. A PP

. P. 38. The presumptive sanction for a frivolous tax appeal is $5,000. Veal

- Hill v. Comm’r , 976 F.3d 775 (7th Cir. 2020) (per curiam). “An appeal is frivolous if the appellant’s claims are cursory, totally undeveloped, or reassert a previously rejected version of the facts. An appeal is also frivolous if it presents arguments that are so insubstantial that they are guaranteed to lose.” McCurry v. Kenco Logistics Servs., LLC , 942 F.3d 783, 791 (7th Cir. 2019) (citations omitted)

. This appeal fits both standards.

T he Wegbreits ’ brief, signed by attorney John E. Rogers, is woefully deficient. The bulk of its 78 pages consists of rambling, unsupported assertions, most of which do not bear any relationship to the reasoning in the tax c ourt’s decision. As we’ve explained, t he only two discernable, arguably relevant arguments are sure losers, stipulated away without excuse and frivolous to boot

. On top of these glaring shortcomings, the Wegbriets a ccuse the IRS ’s attorneys of threaten ing and intimid at ing them to settl e the case , yet t hey offer no evidence for such a serious allegation. Th is baseless accusation is irresponsible and entirely inappropriate for a lawyer admitted to practice before this c ourt.
We have cautioned Rogers before about the consequences of bringing frivolous appeals, Sugarloaf Fund, LLC v. Comm’r , 953 F.3d 439, 441 (7th Cir. 2020), but thatNo. 20-1306 9

warning apparently went unheeded . W e therefore order Rogers to show cause within 14 days why he should not be sanctioned for bringing this utterly frivolous appeal in violation of Rule 38 of the Federal Rule s of Appellate Procedure. We also direct the C lerk of C ourt to forward this opinion to the Illinois Attorney Registration and Discip linary Commission for any action it deems appropriate.
A FFIRMED ; O RDER TO S HOW C AUSE I SSUED