As previously reported, former U.S. Tax Court judge Diane L. Kroupa and her now estranged husband, Robert E. Fackler, were indicted on charges of conspiracy to defraud the United States, tax evasion, making and subscribing a false tax return, and obstruction of an Internal Revenue Service audit. On September 23, 2016, Mr. Fackler pleaded guilty to attempting to evade more than $400,000 in federal taxes. He also signed a plea agreement wherein he sets out in some detail a long-term scheme, which he proclaims was masterminded by Ms. Kroupa to evade taxes.
Fast-forward four weeks following Mr. Fackler’s plea. After what appears to having been thrown under the bus, on October 21, 2016, Ms. Kroupa pleaded guilty to conspiring with the estranged Mr. Fackler, to fraudulently omitting nearly $1 million of income from their federal tax returns. The activity giving rise to the indictment and subsequent plea appears to have transpired for almost a decade – while Ms. Kroupa was a U.S. Tax Court judge.
Shea Jones, Special Agent in charge of the St. Paul, Minnesota field office said following Judge Kroupa’s guilty plea:
“Those charged with upholding the laws are not above the law.”
The fraudulent acts committed by Ms. Kroupa and Mr. Fackler, per the indictment, include:
- Deducting personal expenses as business expenses (e.g., pilates class tuition; music lessons, vacations, home renovation costs, vacation rental fees, home utilities and foreign language tutoring);
- Understating income by almost $1 million;
- Omitting the sale of real property; and
- Falsely claiming insolvency to avoid taxation on cancellation of indebtedness.
It is surely a regrettable day for our nation’s tax system. Prior to the indictment, Ms. Kroupa appears to have had an honorable and untarnished career as a tax lawyer. She served as a judge on the Minnesota Tax Court, an attorney advisor for the Internal Revenue Service and practiced tax law in a Minneapolis law firm. Thereafter, Ms. Kroupa was appointed to the U.S. Tax Court in 2003 (retiring in 2014).
Sentencing hearings have not been set yet. Hopefully, those hearings will put an end to this sad saga.
Larry J. Brant
Larry J. Brant is a Shareholder in Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free Of Potholes," New York University 80th Institute on Federal TaxationVirtual Event, 11.18.21
- To be rescheduled
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free Of Potholes," OSCPA Farming, Ranching & Agribusiness ConferenceBend, OR, 6.2.22-6.3.22