635 F. App'x 216
6th Cir.2015Background
- Maurice Vaughn, former MLB player, hired Ra Shonda Kay Marshall (RKM) and accountant David Krebs (CPA Advisory Group) from 2004–2008 to manage finances, pay bills, and file/pay taxes; Marshall had durable power of attorney and sole signature on Vaughn’s accounts.
- Marshall filed returns correctly in 2004–2006 but failed to file/pay for 2007; by the 2007 due date Vaughn’s accounts were depleted due to Marshall’s embezzlement.
- Vaughn discovered the embezzlement after firing Marshall and Krebs in late 2008 and obtained civil judgments against them for millions.
- The IRS assessed late‑filing/payment penalties under 26 U.S.C. § 6651(a)(1) for 2007; district court granted summary judgment for the United States; Vaughn appealed.
- The sole legal question was whether Vaughn falls within the § 6651(a)(1) “reasonable cause” exception given his delegation to agents and their criminal misconduct.
Issues
| Issue | Vaughn's Argument | United States' Argument | Held |
|---|---|---|---|
| Whether delegation to agents and ordinary business care excuses penalties under § 6651(a)(1) | Vaughn acted with ordinary care in selecting agents; their breach should not impute liability | Statutory duty to file/pay is non‑delegable; reliance on agents is not "reasonable cause" under Boyle | Reliance on agents does not excuse late filing/payment; penalty applies |
| Whether agent embezzlement that left Vaughn without funds made him "unable" to file/pay (disability) | Embezzlement rendered him unable to pay/filing was impossible, like corporate disability in Biomaterials | Disability must be beyond taxpayer's control and oversight; Vaughn retained power to revoke and could have supervised | Embezzlement does not excuse penalties because the inability resulted from risks Vaughn controlled; not within narrow disability exception |
Key Cases Cited
- United States v. Boyle, 469 U.S. 241 (1985) (taxpayer’s duty to file is nondelegable; reliance on agent is not reasonable cause for late filing)
- Matter of American Biomaterials Corp., 954 F.2d 919 (3d Cir. 1992) (corporation may be excused where control people committed fraud leaving no one able to act)
- Conklin Bros. of Santa Rosa, Inc. v. United States, 986 F.2d 315 (9th Cir. 1993) (distinguishes agent reliance from true disability; oversight feasibility is critical)
- Valen Mfg. Co. v. United States, 90 F.3d 1190 (6th Cir. 1996) (disability must be beyond taxpayer’s control; narrow construction encourages compliance)