Employee of the Month

Just when I thought I had put the blog down for a while to get some work done, I stumbled across a recent federal tax case that may be of interest to readers here.

It seems the IRS is after a City of Portland employee and her husband for more than $600,000 in penalties because the couple failed to report their Iranian and Canadian bank accounts as required by law. The penalties for willful violations of the reportng requirement, such as those asserted by the IRS in this case, can run up to 50 percent of the balance in the undisclosed accounts. Ouch!

According to court records, the employee, Roza Malekzadeh, is a residential plans examiner in the Bureau of Development Services. Her husband, Ali Mahyari, is an architect who apparently has a home remodeling business. According to court records, Malekzadeh has been in the United States since 2001, and Mayhari since 2005.

The judge in the case, Karin Immergut, has already ruled against the couple as to their Canadian bank accounts in all three years at issue, 2011 to 2013, and on their Iranian bank accounts for 2012 and 2013. That ruling came down in January of this year. All that is left for trial is whether they are liable for the penalty for the first of the three years, 2011, as to the Iranian accounts.

The real money involved in the case came from the 2011 sale of real estate that the couple owned in Tehran. They sold it for about the equivalent of US$2.9 million. Most of that money allegedly came sloshing through the Iranian and Canadian bank accounts on its way to Malekzadeh and Mayhari.

Their tax returns were prepared by a West Side tax return preparer named David Niebur. He uses a computer program that won't finish the return unless the question is answered whether the taxpayer has any foreign financial accounts. The tax returns said "no," which was false. 

The case is set for trial beginning June 20. Apparently one of the issues for the jury will be how well Malekzadeh and Mahyari understood the English language when they met with Niebur to have their tax return done for that first year. But the judge had this to say about that question back when she ruled for the government on most of the accounts and years:

At the outset, this Court notes that it will not draw the inference that Defendants' limited English proficiency prevented them from understanding their tax obligations. This Court finds that this inference is unreasonable in light of the record in this case: Defendants' characterization of their English comprehension is belied by overwhelming evidence in the record, including that Ms. Malekzadeh has had four English-speaking jobs and was a licensed insurance agent and mortgage broker, both of which require passing examinations administered in English, that Mr. Mahyari earned a Ph.D. from an English-speaking program, and that Defendants opened two bank accounts with CIBC in Canada, another primarily English-speaking country. Moreover, even if this Court were to accept that Defendants, like many other immigrants, had difficulty understanding English, that fact would not insulate them from their reporting obligations. Accordingly, this Court will not consider Defendants' alleged English language limitations in determining whether there is a genuine dispute of material fact regarding the willfulness of Defendants' failure to report their foreign accounts....

Moreover, there is evidence in the record that Defendants used the CIBC accounts to conceal assets from the United States government. Defendants used the accounts to move money from Iran to the United States. They did so by (1) transferring money from Iran to Canada, (2)  purchasing over $474,000 in gold and silver bars in Canada, (3) sending the gold and silver bars to the United States, and (4) selling the gold and silver bars, sometimes in their son's name. Using foreign accounts to conceal assets strongly suggests willfulness on the part of Defendants. Based on these facts, in addition to the other undisputed facts discussed above, this Court finds that Defendants were willful as a matter of law in failing to disclose their CIBC accounts.

Anyway, if you've got business in front of Malekzadeh down at City Hall these days, don't be surprised if she's a little distracted. And speak slowly.