Court Error – Tax Fraud

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7^th Circuit Court of Appeals

Case Name: David B. Shiner v. Bernard Turnoy

Case No.: 14-2999

Officials: POSNER, SYKES, and HAMILTON, Circuit Judges.

Focus: Court Error – Tax Fraud

Bernard Turnoy, the appellant, is an insurance broker who had sold insurance policies to David Shiner’s in‐laws for decades. After Shiner (a successful lawyer in Chicago whose practice focuses on tax and estate planning) demanded that Turnoy split with him the com‐ missions on new policies on the life of Shiner’s mother‐in‐ law, Turnoy sent him a check for $149,000, which was about half the commissions that Turnoy had thus far obtained. Insisting that $149,000 was too little, Shiner sued Turnoy in an Illinois state court for breach of contract. While that suit was pending, Shiner brought a second suit against Turnoy, this one a suit in federal district court, charging that Turnoy had committed tax fraud, in violation of 26 U.S.C. § 7434 by re‐ porting to the IRS on Form 1099 his payment of the $149,000 to Shiner as income to Shiner when in fact, Shiner argued, he (Shiner) had refused to accept the check because had he done so he would have forfeited his claim to be owed more than $149,000 by Turnoy. The district judge, convinced by this very weak argument and unaccountably hostile to Turnoy, ruled in favor of Shin‐ er and ordered Turnoy to pay Shiner damages of $16,000 for the alleged fraud. That ruling was erroneous, because the state court had rejected Shiner’s breach of contract claim the day before the district court’s decision (though in fairness to the district judge, we point out that he would not yet have been aware of the state court’s decision), thus establishing that Shiner was entitled to no more than the $149,000 that he’d already received from Turnoy.

Reversed and Remanded

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.