TAX COURT OPINION

Case: Michael Zorn
Docket Number: 25974-17
Judge: Jones
Opinion Type: bench
Filed: 01/23/2023
Pages: 36

MICHAEL ZORN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent United States Tax Court Washington, DC 20217 Docket No. 25974-17. ORDER OF SERVICE OF TRANSCRIPT Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is hereby ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to the Commissioner a copy of the pages of the transcript of the trial in this case before the undersigned judge at the December 12, 2022, Baltimore, Maryland trial session containing the Court's oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered under Tax Court Rule 155 in due course. It is further ORDERED that, on or before April 19, 2023, the parties shall submit computations under Tax Court Rule 155. (Signed) Courtney D. Jones Judge Served 01/23/23 RECEIVED 1/13/23 IN THE UNITED STATES TAX COURT In the Matter of: MICHAEL ZORN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 25974-17 Pages: 1 through 34 Place: Baltimore, Maryland Date: December 14, 2022 tH!iMMH ~73) 406·2 250 I operitions,]'•n;l'i~o?rs.net I ·1.ww.~scribe1s.n et IN THE UNITED STATES TAX COURT 1 In the Matter of: MICHAEL ZORN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 25974-17 Garmatz United States Courthouse Courtroom 9B 101 West Lombard Street Baltimore, Maryland 21201 December 14, 2022 The above-entitled matter came on for bench opinion, pursuant to notice at 1:31 p.m. BEFORE: HONORABLE COURTNEY D. JONES Judge APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 •+ii@§ H @73)406-2 250 ! o~rat!~ns(i!•esr.rib?rs.n~t I Wo\'W.<?sc1ib1m.net P R O C E E D I N G S 2 (1:31 p.m.) '.fHE CLERK: Calling docket 25974-17, Michael Zorn. (Whereupon, a bench opinion was rendered.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 \ l'Nii·IIH t97 3) 406·2 250 I Op!-nti~ns@!e~l'il:o!!rs.~t I •t.WW~Kribers.n et Bench Opinion by Judge Courtney D. Jones, Judge 3 December 14, 2022 1 2 3 Michael Zorn v. Commissioner of Internal Revenue 4 5 6 7 8 9 Docket No. 25974-17 THE COURT: The Court has decided to· render the following as its oral findings of fact and opinion in this case. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. The oral findings of fact and opinion are made pursuant to the 10 authority granted by section 7459(b) of the Internal 11 Revenue Code and Tax Court Rule 152. Unless otherwise 12 indicated, all statutory references are to the Internal 13 Revenue Code, Title 26 U.S.C., in effect at all relevant 14 times, all regulatory references are to the Code of 15 Federal Regulations, Title 26 (Treas. Reg.), in effect at 16 all relevant times, and all Rule references are to the Tax 17 Court Rules of Practice and Procedure. All monetary 18 amounts are rounded to the nearest dollar. 19 By notice of deficiency dated September 21, 20 2017, the Internal Revenue Service (IRS) determined 21 deficiencies and additions to tax pursuant to sections 22 6651 (fl, 6651 (a) (2), and 6654 against petitioner, Michael 23 D. Zorn, for taxable years 2005, 2006, 2007, 2008, 2009, 24 2010, 2011, 2012, 2013, 2014, and 2015 (Tax Years at 25 Issue) . The amount of the deficiencies and additioni to IM!i·#H 1Y73)406-2250 I o~tJtions,~•escr lh=rs.net I •1tww.escribe1~.net 4 tax are all set forth in Exhibit 1-J, the statutory notice of deficiency, and those amounts are incorporated herein by this reference. In the alternative, respondent argues that if Mr. Zorn is not liable for the fraudulent failure to file additions to tax under section 665l(f), then he is liable for failure to file additions to tax under section 665l(a) (1). The issues for decision are: ( 1) whether, for the Tax Years at Issue, Mr. Zorn received unreported gross 1 2 3 4 5 6 7 8 9 10 income in the amounts stated in the notice of deficiency, 11 or whether some of the amounts received were a non-taxable 12 loan; ( 2) whether Mr. Zorn is entitled to schedule C 13 business expense deductions for the Tax Years at Issue; 14 (3) whether Mr. Zorn is liable for fraudulent failure to 15 file additions to tax under section 665l(f) for the Tax 16 Years at Issue, or in the alternative, whether Mr. Zorn is 17 liable for failure to file additions to tax under section 18 665l(a) (1) for the Tax Years at Issue; ( 4) whether Mr. 19 Zorn is liable for failure to pay additions to tax under 20 section 6651 (a) (2) for the Tax Years at Issue; and I 5) 21 whether Mr. Zorn is liable for failure to pay estimated 22 23 income tax additions to tax for the Tax Years at Issue. Trial in this case was conducted in three parts. 24 First, on November 3, 2021, the Court held a remote 25 partial trial during the Court's Baltimore, Maryland trial ) IFiiM#H i;ii73)406·22S.0 I Op:!'ritions~•esctiber!>.n,H I www.esc,lbers.net session that began on November 1, 2021. Second, on May 5 27, 2022, the Court held a partial trial during a special trial session in Washington, D.C. Third, on December 12, 2022, the Court held another remote partial £rial ~uring the Court's Baltimore, Maryland trial session that began the same day; the Court did not take additional testimony. 1 2 3 4 5 6 7 Mr. Zorn represented himself. 'Respondent was represented 8 9 10 by David A. Indek, Elizabeth C. Mourges, and Bradley C. Plovan. The parties' jointly submitted First Stipulation 11 of Facts (as amended), Second Stipulation of Facts, and 12 Third Stipulation of Facts were admitted into evidence 13 along with exhibits attached thereto. Additionally, at 14 respondent's request, the Court takes judicial notice of 15 the state and bankruptcy court records reproduced as 16 Exhibits 69-R through 73-R. See Petzoldt v. Commissioner, 17 92 T.C. 661, 674-75 (1989). However, the Court only takes 18 notice of Exhibit 71-R for the limited purpose of showing 19 that the Office of the Attorney General of Maryland made 20 the allegations therein, and not to establish the truth of 21 the allegations therein for the purposes of this 22 proceeding. See Estate of Reis, 87 T.C. 1016 (1986) 23 Additionally, the Court reserved ruling on the 24 admissibility of a number of exhibits; we will address 25 them now. ; CaMHA#H 19i3) 406-2 251) I Op'cfHions<:il!E'S.::l'il~rs.n,H I •J.-.\'W.>?-sc1ibers.net First, the Court reserved ruling on Exhibit 74- 6 P, the Affidavit of Patrick E. Tormey from Anne Arundel County and attached ''Plaintiff's Exhibit l." The Court sustains respondent's objection and rejects Exhibit 74-P~ under Federal Rule of Evidence 802. Next, the Court reserved ruling on Exhibit 77-P, Letter to Mary Jewett re Loan Payments dated October 18, 2017. Exhibit 77-P is already included in the record as a portion of jointly stipulated Exhibit 9-J, and so the 1 2 3 4 5 6 7 8 9 10 Court rejects Exhibit 77-P as duplicative and overrules 11 respondent's objections as moot. 12 Next, the Court reserved ruling on Exhibit 78-P, 13 Letter from Ms. Torney dated January 31, 2018. The Court 14 sustains respondent's objection and rejects Exhibit 78-P 15 under Federal Rule of Evidence 802. 16 Finally, the Court reserved ruling on Exhibit 17 82-P, Office Depot/Office Max receipt for USPS Priority 18 Mail and associated tracking information, dated October 19 15, 2021. The Court sustains respondent's objection and 20 rejects Exhibit 82-P because the exhibit was not exchanged 21 with respondent's counsel 14 days prior to the first day 22 of the trial session, which occurred on November 1, 2021, 23 in accordance with the Court's Standing Pretrial Order 24 issued on June 2, 2021. See Rule 131(b). 25 On the evidence before us, and using the burden ~Bii-MH 1;'73)40&-2250 I o~rati~ns<il'es-:1 Jb;,rs.net.l v,-....w.'!scribers.net of proof principles explained below, the Court finds the 7 following facts. FINDINGS OF FACT Mr. Zorn resided in Maryland at the time he filed his Petition for redetermination. Since 1992, Mr. Zorn primarily made a career in insurance sales and financial planning, although he also engaged in other ventures. Mr. Zorn received his license to act as a life and health insurance producer from the state of Maryland 1 2 3 4 5 6 7 8 9 10 on August 7, 1992. Mr. Zorn has owned and operated Value 11 Insurance Group (Value IG) since 2001. Mr. Zorn has filed 12 four separate articles of incorporation for Value IG since 13 2001, forfeiting each charter about two years after 14 formation. The stated purpose on each corporate charter 15 was the sale and marketing of financial products and 16 instruments, and Mr. Zorn served as each corporation's 17 resident agent and lone director. 18 On August 31, 2017, Mr. Zorn filed articles of 19 incorporation with the state of Maryland for Value 20 Insurance Professionals, Inc. (Value IP), and served as 21 the corporation's resident agent and lone director. It is 22 unclear whether Value IP is the successor in interest to 23 Value IG. The articles of incorporation for Value IP 24 state that its primary purpose is to ''sell insurance 25 products.'' Value IP, as of May 20, 2019, the date the ) ~MliAfflH i:;in)406-2 250 I 0~11tk,ns,y<es.::ri~o?rs.net I w,,"N,O\'sc,ibeu.net First Stipulation of Facts was filed, was not in good 8 standing with the state of Maryland and had not filed its annual report for 2018. Additionally, Mr. Zorn also appears to have operated a tour company, Value Travel Service, Inc. (Value Travel). Mr. Zorn filed articles of incorporation with the state of Maryland for Value Travel on November 21, 1990, and Mr. Zorn was listed as the company's resident agent. He forfeited the Value Travel corporate charter on 1 2 3 4 5 6 7 8 9 10 October 5, 1992. Subsequently, on September 10, 1993, 11 Robin L. (Britt) Zorn, Mr. Zorn's former spouse, filed a 12 Trade Name Registration with the state of Maryland. The 13 Trade Name Registration lapsed on October 19, 1998. Mr. 14 Zorn's businesses have never filed federal income tax 15 returns. 16 Mr. Zorn last filed an individual federal income 17 tax return for taxable year 1996. The IRS previously 18 prepared section 6020 substitutes for returns (SFR) for 19 Mr. Zorn's taxable years 2000, 2001, 2002, and 2004; the 20 IRS did not prepare a SFR for taxable year 2003. On 21 February 14, 2006, the IRS issued Mr. Zorn a notice of 22 deficiency for taxable year 2002, and on September 11, 23 2007, the IRS issued Mr. Zorn a notice of deficiency for 24 taxable years 2000, 2001, and 2004. Mr. Zorn did not 25 petition this Court in response to these notices of ) lliii•l§ H (973)406·2 250 I op:iati~ns,~•l!'scril~ts.net I ·..,·ww.uc,ibers.net deficiency. 9 Mr. Zorn had a considerable balance for each of these years, but the collection period has since expired and these years are not at issue in the present case. The IRS initiated an audit of Mr. Zorn for taxable years 2005, 2006, 2007; 2008, 2009, and 2010, arid the audit was conducted by Revenue Agent Marilyn Zimmer (RA Zimmer) . On December 7, 2011, the IRS notified Mr. Zorn that it had not received his tax returns for the same 1 2 3 4 5 6 7 8 9 10 taxable years under audit. The scope of the audit was 11 subsequently expanded to include taxable years 2011, 2012, 12 2013, 2014, and 2015. 13 Throughout the audit process, RA Zimmer issued 14 numerous information document requests pertaining to the 15 initial audit years, as well as the subsequent expansion 16 years. Mr. Zorn did not provide any books or records 17 throughout the audit, failed to appear for numerous 18 appointments with RA Zimmer, and was generally 19 uncooperative throughout the audit process. Mr. Zorn also 20 retained multiple representatives during the audit 21 process, but the representatives only provided RA Zimmer 22 with an incomplete list of the financial institutions that 23 Mr. Zorn was using, did not provide any books or records, 24 and were unable to provide any information that would 25 allow RA Zimmer to complete the audit. •sii@§ H i.973) 406·2 250 I op:rat!oM@oes,:1 il:-=rs.l\et I v,·.,.,w .. ~sc1ibets.net However, Mr. Zorn unexpectedly contacted RA 10 Zimmer on one occasion. On July 16, 2012, Mr. Zorn called RA Zimmer and stated that he knew he owed taxes and he was delinquent in filing his returns. During the call, RA Zimmer asked Mr. Zorn why he had not filed his tax returns, and Mr. Zorn responded that he would come in and explain everything, that he would check his schedule, and that he would call back to set up an appointment within 45 1 2 3 4 5 6 7 8 9 minutes. Mr. Zorn, however, did not call back. 10 RA Zimmer summoned Mr. Zorn's bank and financial 11 records for the Tax Years at Issue and conducted the audit 12 of Mr. Zorn through a direct method of income 13 reconstruction known as the ''specific-item method.'' Mr. 14 Zorn possessed at least 14 separate bank accounts during 15 the Tax Years at Issue, mixed personal and business funds, 16 and frequently used business accounts for personal 17 expenses. 18 During the audit, RA Zimmer also noticed a 19 number of large purchases, including a $22,620 cashier's 20 check to Sea Gate Investors LLC for a property located in 21 Seagate Square, Chesapeake Beach, Maryland, multiple 22 cruise line tickets, an international airline ticket, a 23 vehicle purchased in cash, season tickets for a Major 24 League Baseball team, and a series of trips throughout the 25 United States, including to Disney World, New York City, New Orleans, and Las Vegas. 11 RA Zimmer also noticed that Mr. Zorn engaged in substantial cash dealings during the Tax Years at Issue. 1 2 3 4 Mr. Zorn's cash withdrawals ranged from a low of $13,400 5 6 7 8 9 in 2006 to a high of $148,346 in 2007, and averaged more than $50,000 per year between 2005 and 2012. In 2012, the amount of income reported to the IRS by third party information returns dropped significantly. This appears to have been precipitated by 10 the suspension of Mr. Zorn's license to sell insurance in 11 the state of Maryland on two separate occasions. First, 12 On April 14, 2011, Mr. Zorn's license was revoked because 13 he failed to timely report an arrest to the Maryland 14 Insurance Commission. Pending resolution of the charges, 15 Mr. Zorn's license was briefly reinstated~ September 1, ".froefl 16 2011, through October 13, 2011, the date when Mr. Zorn 17 agreed to a one-year suspension of his license by consent 18 order, retroactive to April 14, 2011, with the exception 19 of the aforementioned period of reinstatement. 20 Mr. Zorn's license was suspended a second time 21 because he conducted multiple sales appointments and 22 submitted an annuity application for a consumer during the 23 period of his first suspension, and he incorrectly 24 answered questions relating to his first suspension on 25 Value IG's application for license renewal. By consent ) lili·i#H f;?73j 406·2250 I op:-rations,~•escr ]~rs.net I W't\''N.esc1ibers.net 12 order agreed to on February 27, 2013, Mr. Zorn agreed to a three-year suspension of his license, retroactive to July 1, 2012. However, while the amount of income reported by third parties dropped significantly, RA Zimmer noticed that Mr. Zorn received an unusual number of large deposits from Mrs. Mary Jewett, an elderly client with terminal cancer and early-stage dementia. Mr. Zorn befriended Mrs. Jewett in the early 2010s, earned her trust, and became 1 2 3 4 5 6 7 8 9 10 her friend and financial advisor. 11 Mr. Zorn persuaded Mrs. Jewett to switch her 12 investment portfolio from Merrill Lynch into an annuity 13 product sold by Value IG. Mr. Zorn never informed Mrs. 14 Jewett about his suspensions. Bank records show that 15 during the Tax Years at Issue Value IG received deposits 16 from Mrs. Jewett totaling $437,078, including: $5,822 in 17 2012; $163,001 in 2013, $96,834 in 2014; and $171,421 in 18 2015. Value IG also received additional deposits from 19 Mrs. Jewett subsequent to the Tax Years at Issue. The 20 funds received by Value IG were not invested, but rather 21 were personally used by Mr. Zorn. Additionally, in 2015 22 Mrs. Jewett's children were removed as the beneficiaries 23 of her Allianz annuity and Mr. Zorn was substituted as the 24 sole beneficiary on the account. 25 During the audit, RA Zimmer sought to determine IS!ii§ H ,y73J 406-2250 I op,nations,J<~s,;i il:-•1m.nH I ·1Mw.0~$Cllbe1rnet 13 1 whether Mr. Zorn's deposits from Mrs. Jewett were~ loan, 2 3 4 5 a gift, or income. RA Zimmer thought that the amounts deposited from Mrs. Jewett might be loans because many of the checks had ''loan'' inscribed on the memo line. ·on August 25, 2016, RA Zimmer conducted an in-home interview 6 with Mrs. Jewett, who was accompanied by Ron Smallman, 7 8 9 Mrs. Jewett's son, Ron's wife Carol, and Barbara Stevanus, o.~(\ a friend who helped Mrs. Jewett manage her household A cy finances, and who Mrs. Jewett subsequently authorized to 10 act on her behalf with a power of attorney. 11 RA Zimmer asked Mrs. Jewett whether she loaned 12 any money to Mr. Zorn, or whether she intended to invest 13 in Mr. Zorn's company as a partner or financial backer. 14 Mrs. Jewett emphatically explained to RA Zimmer that she 15 did not loan any money to Mr. Zorn, but rather Mr. Zorn 16 was supposed to invest the money in her Allianz annuity, 17 and she thought that Allianz and Value IG were one in the 18 same. RA Zimmer asked Mrs. Jewett why some of the checks 19 had the word ''loan'' inscribed on the memo line, and Mrs. 20 Jewett stated that she wrote things in accordance with Mr. 21 Zorn's directions, and she generally did what Mr. Zorn 22 told her to do because she trusted him. 23 RA Zimmer determined, based on her interview 24 with Mrs. Jewett, that the amounts Mr. Zorn received from 25 Mrs. Jewett were not loans, but rather were income that he f~73) 406-2 250 I op:1ations,(l,es.:1.i~rrnet I •1;,w;,-,sc1iberrn et used to finance his lifestyle. Mr. Zorn did make some payments described as "loan payments" to Mrs. Jewett, but the payments were made in inconsistent intervals and 14 amounts; Mr. Zorn did not send any financial statements to 1 2 3 4 5 Mrs. Jewett and there was no written loan agreement or 6 documentation of any kind. The deposits received from 7 Mrs. Jewett represent in excess of 75 percent of the 8 9 10 amounts RA Zimmer determined as Mr. Zorn's taxable income· for taxable years 2013 through 2015. On October 7, 2016, Mrs. Jewett authorized Ms. 11 Stevanus to act on her behalf with a power of attorney. 12 On December 23, 2016, Mrs. Jewett, in response to her 13 worsening financial situation, sent a letter to Mr. Zorn 14 seeking a copy of her Allianz annuity contract, annual 15 statements for her Allianz annuity, a summary of the 16 payments she made to Mr. Zorn, an explanation of where all 17 of her money was invested, copies of beneficiary 18 designations, copies of powers of attorney, and copies of 19 authorizations for Mr. Zorn to make investment decisions 20 on her behalf. Additionally, Mrs. Jewett queried whether 21 she had loaned Mr. Zorn any money over the years, and if 22 so, asked for him to summarize the date, the amount 23 loaned, whether the loan had been repaid, and to provide 24 the balance on any outstanding loans. Mr. Zorn seemingly 25 did not respond to Mrs. Jewett's letter. lifi•l§ H l',)73)406-2 250 I o~rations1~,,.rn:r!C'?rs.net I 'IM'W.>.?scribe1s,n~t 15 On January 9, 2017, Mrs. Jewett and Ms. Stevanus filed a complaint against Mr. Zorn with the Maryland Insurance Administration. Additionally, the Coniume~ Protection Division of the Office of the Maryland Attorney 1 2 3 4 5 General initiated an investigation into Mr. Zorn's 6 7 8 9 10 dealings with Mrs. Jewett. On November 27, 2017, Mrs. Jewett authorized her daughter, Susan Torney, to act on her behalf with a power of attorney. Mrs. Jewett died on February 28, 2018. On January 4, 2019, the Consumer Protection 11 Division of the Office of the Maryland Attorney General 12 filed a civil action on behalf of Mrs. Jewett's estate 13 against Mr. Zorn and Value IG in the Circuit Court for 14 Anne Arundel County, Maryland. The Consumer Protection 15 Division alleged that Mr. Zorn knowingly and willfully 16 obtained by deception, intimidation, or undue influence 17 the property of a vulnerable adult or a person over the 18 age of 68 years old, with the intent to deprive the 19 individual of such property, in violation of Maryland 20 Criminal Law§ 8-80l(b). 21 Mr. Zorn filed for chapter 7 bankruptcy in the 22 United States Bankruptcy Court for the District of 23 Maryland on February 10, 2020. By order dated February 24 11, 2020, the Circuit Court for Anne Arundel County, 25 Maryland, declined to stay the pending litigation, and on ) JMiiMH 1973)406-2 250 I o~rHi~ns,a,es-::l'iberi,net I ¼·l\'w.~sc,ibers.net 1 2 February 19, 2020, that court entered a judgment against Value IG. On October 14, 2020, the Circuit Court ior'Anne 16 3 Arundel County, Maryland, entered a judgment against Mr. 4 5 6 7 8 9 Zorn. On November 12, 2020, the United States Bankruptcy Court, District of Maryland, granted a default judgment against Mr. Zorn, ordering that the judgments obtained on behalf of Mrs. Jewett's estate against Mr. Zorn are nondischargeable under 11 U.S.C. § 523(a) (2) (A) and (a) (4) as the debt resulted from money obtained as the result of 10 false pretenses, false representation, and actual fraud, 11 and fraud while acting in a fiduciary capacity. 12 Additionally, in 2021 the Maryland Insurance 13 Administration revoked both Mr. Zorn's individual licens<2, 14 as well as the license for Value IP, due to his dealings 15 with Mrs. Jewett. 16 Mr. Zorn has not filed a Form 1040, U.S. 17 Individual Income Tax Return, for the Tax Years at Issue, 18 and he last filed a Form 1040 for taxable year 1996. On 19 May 15, 2019, when the case was recalled from the calendar 20 during the Court's Baltimore, Maryland Trial session, 21 which began on May 13, 2019, Mr. Zorn handed respondent's 22 counsel unfiled copies of tax returns for the Tax Years at 23 Issue. These unfiled returns are included in the record 24 as part of the Third Stipulation of Facts, but as 25 discussed further below, there is no evidence that these j IM!iB§ H 15'73;4Q6-2250 I op:rati~ns,~•esi::r iOOrnel I viww.esctibeis.net 17 returns have been properly filed with the IRS. No amounts were withheld on Mr. Zorn's income, he did not pay estimated taxes, and he has not made any payments towards his federal liabilities for any of the Tax Years at Issue, excluding a nominal refundable credit for taxable year 2009. Accordingly, the IRS prepared section 6020(b) SFR for each of the Tax Years at Issue. Each SFR is dated November 3, 2016, and the accompanying certification is 1 2 3 4 5 6 7 8 9 10 dated November 5, 2016. On September 21, 2017, the IRS 11 issued Mr. Zorn a statutory notice of deficiency 12 pertaining to the Tax Years at Issue. Mr. Zorn timely 13 filed a Petition for redetermination with this Court on 14 December 14, 2017. 15 Subsequent to the Tax Years at Issue, Mr. Zorn 16 has failed to file a Form 1040 for taxable years 2016, 17 2017, 2018, 2019, 2020, and 2021. 18 19 OPINION Generally, the Commissioner's determinations in 20 a notice of deficiency are presumed correct, and the 21 taxpayer bears the burden of proving those determinations 22 erroneous. Rule 142(a) (l); Welch v. Helvering, 290 U.S. 23 111, 115 (1933); see also INDOPCO, Inc. v. Commissioner, 24 503 U.S. 79, 84 (1992). In an unreported income case, 25 such as this one, if the Commissioner introduces evidence ISii·MH (973) 406-22S0 I o~~tionsr{l,~.s,;:rioo-rs,net ! •1,ww,,;,scribe1s.n et 18 that the taxpayer received unreported income, the taxpayer 1 2 must show by a preponderance of the evidence that the 3 4 5 6 7 8 9 deficiency determination was arbitrary and erroneous. See Hardy v. Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), aff'g T.C. Memo. 1997-97. In order to shift the burden of proof as to a factual issue under section 7491(a), taxpayers must, among other things, introduce credible evidence as to the factual issue and maintain required records. 10 § 7491 (a) (1), (2). Mr. Zorn has failed to do so. 11 However, with respect to the fraudulent failure 12 to file penalties under section 6651(f), respondent bears 13 the burden of proof by clear and convincing evidence. 14 § 7454(a); Rule 142(b); Clayton v. Commissioner, 102 T.C. 15 632, 646 (1994 I 16 I. Deficiency 17 Section 61(a) provides that gross income 18 includes ''all income from whatever source derived.'' See 19 Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955) 20 Every person liable for tax must maintain books and 21 22 23 24 records sufficient to establish the amount of his gross income. § 6001; Estate of Mason v. Commissioner, 64 T.C. 651, 656 (1975), aff'd, 566 F. 2d 2 ( 6th Cir. 1977) When a taxpayer fails to keep sufficient records, the 25 Commissioner may compute taxable income through a method ) ISH·MH \973) 406-2250 I operatloml(l,es,:1 i~rs.n1!'t I •1,ww.~sc-rib,m.n et that ''does clearly reflect income.'' § 446(b); Cole v. 19 Commissioner, 637 F.3d 767, 774-75 (7th Cir. 2011), aff'g T.C. Memo. 2010-31; Flynn v. Commissioner, T.C. Memo. 2021-43, at *23. RA Zimmer employed the specific items method of proof and the bank deposits method of proof to reconstruct 1 2 3 4 5 6 7 Mr. Zorn's income. The specific items method is a direct 8 method of proof that has been approved by this Court, and 9 the bank deposits method of proof is well established. 10 See Price v. Commissioner, T.C. Memo. 2004-103, 2004 WL 11 859198, at *10; see also DiLeo v. Commissioner, 96 T.C. 12 858, 867 (1991), aff'd, 959 F.2d 16 (2d Cir. 1992). Bank 13 deposits are prima facie evidence of income. Tokarski v. 14 Commissioner, 87 T.C. 74, 77 (1986); Estate of Mason v. 15 Commissioner, 64 T.C. at 656-57. When using the bank 16 deposits method, the Commissioner is not required to show 17 that each deposit or part thereof constitutes income or 18 prove a likely source. Price v. Commissioner, 2004 WL 19 859198, at *11. When employing the bank deposits method, 20 ''the Government must take into account any non-taxable 21 source or deductible expense of which it has knowledge.'' 22 Price v. United States, 335 F.2d 671, 677 (5th Cir. 1964) 23 The taxpayer bears the burden of establishing that items s "should be excluded from income or allowed as deduction"." 24 25 Gemma v. Commissioner, 46 T.C. 821, 833 (1966); see a.Isa ) IISii@H ~73) 406·2250 I o~ritions1tr,ev.:1 ibets.net I •t,·,, .. m~si::ribers.n et 20 1 2 3 4 5 6 7 8 9 Clayton v. Commissioner, 102 T.C. at 6~. Mr. Zorn argues that the deposits he received from Mrs. Jewett in taxable years 2012, 2013, 2014, and 2015 were non-taxable loan proceeds, and RA Zimmer should not have included the amounts in calculating his income. In tax law, a loan is ''an agreement, either express or implied, whereby one person advances money to the other and the other agrees to repay it upon such terms as to time and rate of interest, or without interest, as the 10 parties may agree." Welch v. Commissioner, 204 f; 3d 1228, 11 1230 (9th Cir. 2000) (quoting Commissioner v. Valley 12 Morris Plan, 305 F.2d 610, 618 (9th Cir. 1962)), · aff'g 13 T.C. Memo. 1998-121. It is well settled that loan 14 proceeds are not included in gross income. Commissioner 15 v. Tufts, 461 U.S. 300, 307 (1983). Whether a particular 16 transaction constitutes a loan is a question of fact to be 17 determined by considering all of the pertinent facts in 18 the case. Fisher v. Commissioner, 54 T.C. 905, 909 19 (1970). 20 Courts consider various factors in determining 21 whether the parties intended a bona fide loan, such as: (1) the ability of the borrow• to repay; el 22 ( 2) the existence 23 or nonexistence of a debt instrument; (3) security, 24 interest, a fixed repayment date, and a repayment 25 schedule; (4) how the parties' records and conduct reflect IMii-i#H 1J73J 406·2 250 I oper;11i~ns1~•es,:l'tl:"!'n,net I ·1.-.,•w,escribe1s.n et the transaction; 21 (5) whether the borrower made repayments; ( 6 I whether the lender demanded repayment; ( 7) the likelihood the loan was disguised compensation for services; and (8) the testimony of the purported borrower and lender. Welch v. Commissioner, 204 F.'3d at 1230; Frierdich v. Commissioner, 925 F.2d 180, 182 (7th.Cir. 1991), aff'g T.C. Memo. 1989-393; see also Todd v. Commissioner, T.C. Memo. 2011-123, aff'd, 486 ~~ Appx. 423 (5th Cir. 2012 I. These factors are ''non-exclusive'' 1 2 3 4 5 6 7 8 9 10 and provide a ''general basis upon which courts may analyze 11 a transaction." Stanley v. Commissioner, T.C. Memo. 2016- 12 196, at *8 (quoting Welch v. Commissioner, 204 F.3d at 13 1230). 14 First, Mr. Zorn's ability to repay the amounts 15 of the purported loans is doubtful. Mr. Zorn's license to 16 sell insurance was suspended for nearly the entire period 17 between April 14, 2011 and July 1, 2015, with limited 18 exception, and as a consequence, Mr. Zorn's ability to 19 generate income was severely hampered. The deposits from 20 Mrs. Jewett represent a significant portion of the 21 deposits into Mr. Zorn's accounts during taxable years 22 2012 through 2015. 23 Next, during trial Mr. Zorn stated that 24 ''anything I ever did with Mary, I mean, I did in writing.'' 25 Contrary to his statement, however, there was no note or ) IMH·i¥H {;,]3J 406-2 250 I operJtloM@es,:ri~rrnet ! '!.W'/,".'l!~ctlbets.n et debt instrument evidencing any type of loan arrangement 22 between Mr. Zorn and Mrs. Jewett. The only contemporaneous indication that the deposits from Mrs. Jewett were a loan is that some of the checks had the word ''loan'' inscribed on the memo line, but this writing is not determinative. se,e.g., Alhadi v. Commissioner, -T.c.· cJjJ" 1 2 3 4 5 6 7 Memo. 2016-74, at *19. Further, this inscription on the 8 checks is further complicated by the fact that Mrs. Jewett 9 wrote things in accordance with Mr. Zorn's instructions. 10 Additionally, there was no security interest, stated 11 interest rate, fixed repayment date, or repayment 12 schedule. 13 Furthermore, Mrs. Jewett believed that Mr. Zorn 14 was investing all of the money she gave to him, and that 15 she did not loan any money to Mr. Zorn. This fact is 16 further confirmed by the testimony of Ms. Stevanus. Mrs. 17 Jewett's December 23, 2016 letter further evidences the 18 fact that she was unaware of the existence of any loan 19 arrangement with Mr. Zorn. The only record that Mr. Zorn 20 has produced to date is an October 18, 2017 letter to Mrs. 21 Jewett, which is of questionable authenticity, that 22 reflects his characterization of the purported arrangement 23 with Mrs. Jewett. 24 Mr. Zorn did make a number of payments described 25 as ''loan payments'' to Mrs. Jewett, but the payments did ) l@ii@H 1;>73) 406-2250 I o~rati~ns,~•e,:rlb?rrnet I ·1,ww.~scribe1rnet not begin until more than 18 months after Mr. Zorn first accepted money from Mrs. Jewett, were paid'at inconsistent 23 intervals, and were made in inconsistent amounts. Further, the payments to Mrs. Jewett frequently occurred after she transferred a considerable sum of money to·Mr. Zorn. This Court is not required to accept a taxpayer's self-serving testimony. See Tokarski v. Commissioner, 87 T.C. at 77. Mr. Zorn has failed to 1 2 3 4 5 6 7 8 9 10 corroborate his claim of bona fide loans with sufficient 11 reliable evidence. The testimony of Ms. Stevanus, Mrs. 12 Jewett's POA, was persuasive given her personal knowledge 13 of Mrs. Jewett's finances. Conversely, the testimony of 14 Raymond Jewett, Mrs. Jewett's step son, was not 15 persuasive, especially in light of his admission that he 16 did not know much about Mrs. Jewett's finances and he had 17 never looked at her financial documents. 18 Accordingly, the amounts that Mr. Zorn received 19 from Mrs. Jewett are not loans and the IRS properly 20 determined that they constitute taxable income. 21 Next, in his petition Mr. Zorn asserts that the 22 IRS erred by not permitting deductions for certain 23 business expenses. Deductions are a matter of legislative 24 grace, and the taxpayer generally bears the burden of 25 proving entitlement to any deduction claimed. Rule ) ISH•i#H (,}73) 406·2 250 I opa,r~tionsQ1,escrib;:.1s,net I w,w;.,m:rib,m.net 1 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. at 84. 2 Additionally, certain deductions such as vehicle and 24 3 4 5 6 7 8 9 travel expenses require adherence to the strict substantiation requirement of section 27J/ (di (1) and (3). w cg In short, Mr. Zorn has not substantiated his entitlement to any such deductions. Mr. Zorn has not provided any documentation and did not provide any testimony to substantiate the existence of ordinary and necessary business expenses. 10 Mr. Zorn has not met his burden of proof to show 11 that the amounts received from Mary Jewett constitute a 12 loan and has not otherwise presented evidence to show that 13 the IRS erred in determining the amounts due. Mr. · Zorn 14 received numerous payments and commissions from insurance 15 companies, as well as the amounts from Mrs. Jewett, and he 16 has not substantiated any claimed expenses. Therefore, we 17 sustain the deficiencies determined in respondent's notice 18 of deficiency. 19 II. Additions to Tax 20 21 A. Fraudulent Failure to File under Section 6651/f) The IRS determined that Mr. Zorn's failure to 22 file was fraudulent and that he is liable for additions to 23 tax under section 665l(f) for each of the Tax Years at 24 Issue. When any failure to file a return is fraudulent, 25 section 665l(f) imposes an addition to tax of up to 75 .Mii-MH 1~73) 406-2250 I Opi=IJtionsr~,es.:l'ibers,net ! 'hWW.e5.Ctlbersnet percent of the amount of tax required to be shown on the 25 return. A substitute for return prepared by the Commissioner under section 6020(b) does not qualify as a return for purposes of sections 6651 (a) ( 1) and ( f) . 6651 (g) (1). The Commissioner bears the burden of proving fraud by clear and convincing evidence, and must show that: I 1) the taxpayer underpaid his income tax for each year at issue; and (2) at least some portion of each 1 2 3 4 5 6 7 8 9 10 underpayment was due to fraud. § 7454(a); Rule 142(b); 11 12 see also Clayton v. Commissioner, 102 T.C. at 646; DiLeo v. Commissioner, 96 T.C. at 8j3. Mr. Zorn has stipulated {I' 13 that he has not filed a Form 1040 income tax return for 14 any of the Tax Years at Issue. Respondent has met his 15 initial burden of showing that Mr. Zorn had an obligation 16 to file tax returns showing a tax liability for each of 17 the years in issue. See §§ l; 6011 (a), 6012 (a) (1) (A); 18 Clayton v. Commissioner, 102 T.C. at 653. 19 The existence of fraud is a question of fact to 20 be determined from the entire record. See DiLeo v. 21 Commissioner, 96 T.C. at 874. Because direct evidence of 22 a taxpayer's fraudulent intent is seldom available, fraud 23 may be shown through circumstantial evidence, including 24 the well-established ''badges of fraud'' on which Courts 25 often rely. See Petzoldt v. Commissioner, 92 T.C. at 699; Porter v. Commissioner, T.C. Memo. 2015-122~ A taxpayer's CJJ"" 26 entire course of conduct may establish the requisite fraudulent intent. Stone v. Commissioner, 56 T.C. 223, 224 (1971). The Court looks to the following badges of fraud to determine fraudulent intent: (1) failure to file tax returns; ( 2 I maintenance of inadequate books and records; (3) understatement of income; (4) implausible or inconsistent explanations of behavior; (5) concealment of 1 2 3 4 5 6 7 8 9 10 income or assets; (6) failure to cooperate with tax 11 authorities during the audit; (7) engaging in illegal 12 activities; (8) an intent to mislead which may be inferred 13 from a pattern of conduct; (9) lack of credibility of the 14 taxpayer's testimony; ( 10) filing false documents; and 15 (11) dealing in cash. 16 The additions to tax for fraud have frequently 17 been imposed on taxpayers "who were knowledgeable about 18 their taxpaying responsibilities*** [and] consciously 19 decided to unilaterally opt out of our system of 20 21 taxation." Miller v. Commissioner, 94 T.C. 316, 335 ~02, (1990); see also Niedringhaus v. Commissioner, 99 T. C. • 22 212, 217-19 (1992). 23 While the mere failure to file a return, 24 standing alone, is not sufficient to support a finding of 25 fraud, an extended pattern of failing to file returns is a ' .Sii•i§ H {;,7 3) 406-2 250 I ope1ations4\1ei,:t"ib:,rs.net I •t,,'\'W.'!!SCl!betrn el badge of fraud and may provide persuasive circum~tantfal 27 evidence of the intent to evade tax. Porter v. i;i. Commissioner, T.C. Memo. 2015:..1)6, at *53-54 · (citing c.s-r Bradford v. Commissioner, 796 F.2d 303, 308 (9th Cir, 1986)). Mr. Zorn has not filed an individual tax returri since taxable year 1996, he has not filed any tax return for the Tax Years at Issue, and subsequently he has not filed a tax return for taxable years 2016, 2017, 2018, 2019, 2020, or 2021. During this case Mr. Zorn handed 1 2 3 4 5 6 7 8 9 10 respondent's counsel completed copies of Form 1040 for the 11 Tax Years at Issue, but ''hand delivery of a return to 12 counsel for respondent does not constitute the filing of 13 that return,'' and there is no evidence that Mr. Zorn has 14 ever properly filed those returns with the IRS. 15 § 6091(b) (1); Treas. Reg.§ 1.6091-2(d) (1), -l(c); Smyth 16 v. Commissioner, T.C. Memo. 2017-29, at *9 (quoting 17 Quarterman v. Commissioner, T.C. Memo. 2004-241, 2004 WL 18 2361672, at *3 n. 6). Furthermore, none of Mr. Zorn's 19 businesses have ever filed a federal income tax return. 20 Mr. Zorn stated that he has ''been audited by the 21 IRS every year from 1991 forward.'' Mr. Zorn was clearly 22 aware of his obligation to file a tax return because he 23 had done so previously; the record clearly shows that Mr. 24 Zorn filed an individual income tax return for taxable 25 years 1990 through 1996. Additionally, Mr. Zorn was aware ~Sil·MH {~73) 406-2250 i ,:,pe,ations,t•es-:rlbm.net) •1,ww.~Krlbe1s.n et of his obligation to file a tax return because the IRS 28 issued numerous notices to Mr. Zorn, prepared SFRs, issued notices of deficiency for taxable years 2000, 2001, 2002, and 2004, and Mr. Zorn held himself out as a financial advisor. This factor weighs against Mr. Zorn for each of the Tax Years at Issue. Additionally, Mr. Zorn failed to report substantial sums of gross income during the Tax Years at Issue. Mr. Zorn had a legal duty to report this income 1 2 3 4 5 6 7 8 9 10 and he has not satisfactorily explained his failure to do 11 so. See § 6012 (a) (1) (A). In fact, Mr. Zorn's unfiled 12 copies of tax returns for the Tax Years at Issue reflect 13 the same amount of gross income as found on the SFRs. 14 This Court has held that "consistent understatements of 15 income in substantial amounts over a number of years by 16 knowledgeable taxpayers, standing alone, are persuasive 17 evidence of fraudulent intent to evade taxes." Asbury v. 18 19 Commissioner, T.C. Memo. 2011-107, 2011 WL 1990541, at *8 f (quoting Otsuki v. Commissioner, 53 T.C. 96, 1o'Jv(l969)). 20 This factor weighs against Mr. Zorn for each Tax Year at 21 Issue. 22 Further, Mr. Zorn failed to cooperate with RA 23 Zimmer during the audit. The relevant inquiry is Mr. 24 Zorn's level of compliance, or lack thereof, during the 25 audit process. Porter v. Commissioner, T.C. Memo. 2015- t~MH·MH \'973) -106·2 2S0 I oprmtlonsn),es,:r iOOts.net I ¼WW,'!scribeis.n et 122, at *55-56. 29 In his Reply to Answer, Mr. Zorn admitted that he did not provide any records to the IRS for any of the Tax Years at Issue, and there is no evidence in the record to establish that Mr. Zorn actually maihtained any books and records. Additionally, Mr. Zorn did not meet 1 2 3 4 5 6 with RA Zimmer and he failed to appear for multiple 7 8 9 10 appointments with her. Mr. Zorn failed to cooperate during the audit and this factor weighs against him for each of the Tax Years at Issue. Further, the Circuit Court of Anne Arundel 11 County, Maryland, entered judgments against Mr. Zorn and 12 Value IG for his dealings with Mrs. Jewett, finding that 13 Mr. Zorn obtained Mrs. Jewett's money through deception, 14 intimidation, or undue influence, in violation of Maryland 15 Criminal Law§ 8-801(b). Additionally, the United States 16 Bankruptcy Court, District of Maryland, held that Mr. 17 Zorn's debt to Mrs. Jewett's estate was non-dischargeable 18 because the debt resulted from money obtained as the 19 result of false pretenses, false representation, and 20 actual fraud, and fraud while acting in a fiduciary 21 capacity. This factor weighs against Mr. Zorn with 22 respect to taxable years 2012, 2013, 2014, and 2015. 23 Additionally, Mr. Zorn regularly dealt in large 24 sums of cash, averaging more than $50,000 per year from 25 taxable years 2005 through 2012. Dealing in cash to avoid ~~IIH·MH i97 3) 406·2251) I Op,i-tatlons@1es-:ribm.net l •1,ww.o!scribers.n et 30 the Commissioner's scrutiny is another badge of fraud, and this factor weighs against Mr. Zorn with respect to taxable years 2005 through 2012. Se":, e.g., Reynoso v. cy Commissioner, T.C. Memo. 2016-185, at *26. On this record, respondent has clearly and· convincingly established Mr. Zorn's fraudulent intent under section 6651(f). Accordingly, we will sustain the additions to tax pursuant to section 6651(f), and we need not address respondent's alternative argument under 1 2 3 4 5 6 7 8 9 10 section 6651 (a) (1). 11 12 B. Failure to Pay Under Section 6651 (a) (2) Next, the IRS determined that Mr. Zorn is liable 13 for the failure to pay additions to tax under section 14 6651 (a) (2) for each of the Tax Years at Issue. Section 15 6651 (a) (2) imposes an addition to tax on taxpayers for 16 their failure to timely pay the amount of tax shown on a 17 return. See also § 6651 ( g) ( 2) . When a taxpayer has not 18 filed a valid return, the section 6651 (a) (2) addition to tax may not be imposed unless the €ecretary has prepared a 5 19 .., 20 substitute for return. See Wheeler v. Commissioner, 127 21 T.C. 200, 210 (2006), aff'd, 521 F.3d 1289 (10th Cir. 22 2008). 23 The addition to tax is calculated as 0.5 percent 24 of the amount shown as tax on the return but not paid, 25 with an additional 0.5 percent for each month or fraction 31 thereof during which the failure to pay continue~ up to a .. ' maximum of 25 percent. § 6651 (a) (2). With regard to taxable years 2012, 2013, 2014, and 2015, the notice of deficiency provides that the additions to tax under section 6651 (a) (2) will "be computed later." The notice of deficiency did not calculate the amounts of the section 6651 (a) (2) additions to tax for taxable years 2012, 2013, 2014, and 2015 because the period necessary to support the assertion of the maximum penalty amount under section 1 2 3 4 5 6 7 8 9 10 6651 (a) (2) had not yet been attained. See_,e.g., Gardner C...)J 11 v. Commissioner, T.C. Memo. 2013-67; Good v. Commissioner, 12 T.C. Memo. 2012-323. 13 To carry his burden that imposition of section 14 6651 (a) (2) additions to tax is appropriate, the 15 Commissioner must introduce evidence that the tax was 16 shown on a federal income tax return and not paid. 17 Cabirac v. Commissioner, 120 T.C. 163, 170-72 (2003), 18 aff'd without published opinion, 94 A.F.T.R. 2d (RIA) 19 2004-5490 (3d. Cir. 2004). Respondent has met its burden 20 by showing that the IRS prepared SFRs that satisfy the 21 requirements of section 6020(b), providing Forms 4549, 22 886-A, and 13496 for each of the Tax Years at Issue. See 23 Cabirac v. Commissioner, 120 T.C. at 170-72. Respondent 24 has also shown that Mr. Zorn has failed to pay his federal 25 income tax obligations for the Tax Years at Issue. Mr. n.@ii!MH \'iil 3) 406·2 250 I op,mtionsr(l•e5C1·il:>'!!r:..net j 'l;Nw.'!'mibers.n et 32 Zorn did not argue and has not shown reasonable cause, and thus we will sustain the additions to tax pursuant"to section 6651 (a) (2) See Lloyd v. Commissioner, T.C. Memo. 2020-92. C. Failure to Pay Estimated Tax Under Section 6654 Finally, the IRS determined that Mr. Zorn is liable for failure to pay estimated tax additions to tax under section 6654. The section 6654(a) addition to tax is imposed on underpayments of estimated tax unless an 1 2 3 4 5 6 7 8 9 10 exemption applies. A taxpayer must pay estimated tax for 11 any year in which he has a "required annual payment." 12 § 6654 (di. Pursuant to section 6654 (di (1) (Bl, a "required 13 annual payment" is defined as "the lesser of (ii 90 14 percent of the tax shown on the return for the taxable 15 year (or, if no return is filed, 90 percent 6f the tax for 16 such year)'', or (ii) if the individual filed a return for 17 the preceding taxable year, then ''100 percent of the tax 18 shown on the return of the individual for the preceding 19 taxable year." 20 Respondent has met his burden of production 21 under section 7491 by producing evidence that Mr. Zorn was 22 required to make annual payments under section 6654(d) for 23 the Tax Years at Issue. Mr. Zorn has stipulated to.the 24 fact that he did not make any estimated income tax 25 payments for the Tax Years at Issue, excluding taxable IMii@§ H 1973)406-2250 I o~rations<a•ei.::1 iben,net I ·mvw.,nctibe1s.net 33 1 2 3 4 5 6 7 8 9 year 2009. With regard to taxable year 2009, Mr. Zorn received a $2 refundable credit that has been applied towards his tax liability, which is substantially less than the estimated payments required under section 6654 (d) (1) (B), and Mr. Zorn has made no other payments towards his tax liabilities for the Tax Years at Issue. Generally, no reasonable cause exception exists for the section 6654(a) addition to tax. Treas. Reg. § 1. 6544-1 (a) (1). There are exceptions to the section 10 6654(a) addition to tax, but Mr. Zorn does not meet the 11 requirements of these exceptions. See § 6654 (e). 12 Accordingly, we will sustain the additions to tax pursuant 13 to section 6654(a) 14 III. Conclusion 15 We have considered the parties' remaining 16 arguments, and to the extent not discussed, conclude that 17 those arguments are irrelevant, moot, or without merit. 18 This concludes the Court's oral Findings of Fact and 19 Opinion in this case. A decision will be entered under 20 Rule 155. 21 22 23 24 25 (Whereupon, at 2:24 p.m., the above-entitled matter was concluded.) IRIIM#H \973)406-2250 I op&1atlons4l,es,::ribP.1s,net I •1,ww.%cribers.net CERTIFICATE OF TRANSCRIBER AND PROOFREADER 34 CASE NAME: Michael Zorn v. Commissioner DOCKET NO.: 25974-17 We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 34 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Gary Baldwin on December 14, 2022 before the United States Tax Court at its session in Baltimore, MD, in accordance with 1 2 3 4 5 6 7 8 9 10 the applicable provisions of the current verbatim 11 reporting contract of the Court and have verified the 12 accuracy of the transcript by comparing the typewritten 13 transcript against the verbal recording. 14 15 16 17 18 19 20 21 22 23 24 25 Amelia Mastandrea, CDLT-210 Transcriber 1/13/23 Date Susan Patterson, CDLT-174 Proofreader 1/13/23 Date ) li3iii@H t973J 406-2 250 I OJ>?UtionstD.•es-:r ibe-rs.net ! •1,ww,,:iscribe1s,net