Duke Cunningham Back in Tax News As a Judge Rejects His Complaint About the IRS

September 10, 2010

IRS penalties and interest on unpaid taxes often add up to more than the originally unpaid tax, and that’s probably what’s happening to former war hero, former congressman and current federal prisoner Randy “Duke” Cunningham, who complains that the IRS is robbing him, according to the San Diego Union-Tribune. The Union-Trib originally broke the Cunningham story.

Cunningham wrote to Judge Larry Burns, saying the IRS was going beyond the terms of the court settlement. The judge explained that the IRS’s efforts to collect $1.3 million from Cunningham for back taxes, penalties and interest on bribe income received during 2003 and 2004 have nothing to do with the $1.8 million Cunningham agreed to pay in restitution as part of his court settlement and sentencing in 2005. Cunningham is half-way through an 8-year sentence for receiving bribes and tax evasion.

One way to achieve “abatement,” the IRS term for forgiveness of penalties, is for Cunningham to show that he made an honest effort to pay the correct amount, to demonstrate that he used what the IRS calls “ordinary business care and prudence.” That will always be hard to show in cases of undeclared income from bribes. The IRS’s Publication 525 is admirably succinct in its explanation of what recipients of bribes are supposed to do:

Bribes. If you receive a bribe, include it in your income.”

No one needs a CPA to decipher that one. Cunningham probably has a better shot at abatement of penalties if he pleads poverty, although it’s hard to convince the Service that its penalties are “against equity and good conscience” when their files are full of proof that during his time here in Washington, Cunningham lived the classically dissolute life of a corrupt politician. He was “above it all” as a heroic Top Gun pilot, but he’ll have to take a different approach in dealing with the IRS.


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