$300,000 Income Tax Reward (Peymon Mottahedeh)

[The Observer]

I looked a little further at Peymon's link to "Anarchopulco" where apparently he appeared as a speaker in 2020 and is appearing this year as well. From what I can gather, "Anarchopulco" purports to be a convention to promote anarchy. What it appears to be is nothing but a parade of promoters, shills and scammers hoping to liberate some coin from the attendees. So not much shock should there be to find out that Peymon is in the thick of it. But it seems a bit ironic that even anarchy is adopting some aspects of capitalism. I am sure traditional anarchists who shuffled off the mortal coil over the last 150 years are rolling in their graves.

Some of the exciting topics are:

1) "The Endocannabinoid System & COVID-19" - my guess is that the speaker presenting this is willing to sell you some ganja that he promises will keep the evil COVID away.

2) "Medicine has expired" - Seems to be a shocking topic, given the millions of people working in the health industries throughout the world. But I am sure the speaker is willing to let you know where you can get alternative medicine in its place.

3) "Teaching Natural Law in India" – Experiences from the field" - It is not clear if the "field" means the speaker's experience was gained in defeating the Indian court system or was simply something he learned while harvesting a field of jute outside of Calcutta. I am guessing the latter - but I am sure he will offer some do-it-yourself packages for a fee.

4) "Transcending Trauma with pleasure" - My first thought was what does this have to do with anarchism; my second thought was that this must simply be a cheezie ploy to sell the marks a set of sadomasochistic "encounters." Anarchy indeed.

All of this happens in Acapulco, which seems to make some business sense, at least in view of the promoters. They certainly don't have to worry about the Mexican government shutting them down over the lack of substance of this convention. And they certainly don't have to worry about being charged with scamming someone in Mexico. And anyone coming to Acapulco and able to stay there for 9-10 days should have the money that the scammers are looking to liberate from them.

Oh yeah, nearly forgot. Peymon's topic this year is "How to safely stop filing and paying US Income Tax by following the letter of the law and IRS 1040 tax form!" But I am guessing he won't be sharing his results from his and his wife's litigations with the US government over their tax liabilities.

[The Observer]

In an application filed on January 4, Mottahedeh claims that Peter Gibbons has agreed to represent him as well as his wife. As of today, over a week later, no appearance from Gibbons. The Ninth gave him until January 19 for either a pro se brief or a lawyer's appearance.

So any news on whether Peymon filed a brief? Or did his attorney appear? Or did he manage to contrive another delay?

[jcolvin2]

Peter Gibbons entered an appearance for Peymon on January 19, 2021, and filed an "urgent" (and unopposed) motion to extend the time in which to file an Opening Brief to March 30, 2021. The court granted Gibbons' request:

Filed clerk order (Deputy Clerk: TAH): The appellant’s unopposed late motion (Docket Entry No. [23]) for an additional extension of time to file the opening brief is granted. The opening brief is due March 30, 2021. In light of the lengthy pendency of this appeal, any further request for an extension of time to file this brief is disfavored. The answering brief is due April 29, 2021. The optional reply brief is due within 21 days after service of the answering brief.

Gibbons entered an appearance for April Mottahedeh a couple of weeks earlier, and the Opening Brief in that case is now due on March 22, 2021:

Filed clerk order (Deputy Clerk: LBS): Appellant’s unopposed motion [21] for an extension of time to file the opening brief is granted. The opening brief is due March 22, 2021. The answering brief is due April 21, 2021. The optional reply brief is due within 21 days after service of the answering brief.

[wserra]

jcolvin - I'm interested in your opinion on this. I'm interested in anyone's opinion, actually - but jcolvin does this sort of thing for a living.

Gibbons has now appeared for both Peymon and April. Before accepting the representation of two parties in the same case, it is black-letter legal ethics that a lawyer must assure him/herself that there is no conflict between the clients. If a conflict exists, sometimes it is waivable, in which case the joint representation can proceed so long as the conflict is fully set out and waived in writing. Sometimes it isn't waivable, in which case the joint representation is ethically impermissible. All this, of course, is completely dependent on the facts.

At the time of the events that led to the litigation, the Mottahedehs lived in California, a community property state. You'll be shocked to hear that they did not file returns. The IRS sent them notices of deficiency (based on substitutes for returns) for the years in question, dividing the income equally between them. Since our heroes didn't file a joint return, the tax, additions and penalties were assessed against each of them separately. The Mottahedehs had a joint trial in Tax Court, at which they complained about the details of the IRS' assessments on several fronts (I've just added people who don't file returns and then complain bitterly about IRS calculations in SFRs to my personal definition of "chutzpah").

One of those multiple complaints matters here: the Tax Court opinion shows that April complained that the IRS attributed half of what she claims was Peymon's income to her. "Under California community-property law the income is community property, not Peymon Mottahedeh's sole property". The Mottahedehs moved to reargue in the TC, devoting an entire section (pp 29-38) to the errors the TC allegedly made incorrectly attributing income to April. Finally, both April and Peymon moved to sever their appeals, because "April Mottahedeh needs to properly and fully address in her Appeal is the alleged error of the Tax Court in assigning half of the income of Appellant Peymon Mottahedeh to Appellant April Mottahedeh".

Despite the presence of hints in the papers that Peymon does not object to all of the community income being assigned to him, this surely looks like a conflict to me. The only way I would even consider joint representation is if I had in my file two separate waivers laying all this out in more detail than I have here, sworn to separately. And I probably wouldn't do it then either. If everything is so hunky-dory between them, why the need to sever the appeals?

Nu?

[jcolvin2]

jcolvin - I'm interested in your opinion on this. I'm interested in anyone's opinion, actually - but jcolvin does this sort of thing for a living.

Gibbons has now appeared for both Peymon and April. Before accepting the representation of two parties in the same case, it is black-letter legal ethics that a lawyer must assure him/herself that there is no conflict between the clients. If a conflict exists, sometimes it is waivable, in which case the joint representation can proceed so long as the conflict is fully set out and waived in writing. Sometimes it isn't waivable, in which case the joint representation is ethically impermissible. All this, of course, is completely dependent on the facts.

At the time of the events that led to the litigation, the Mottahedehs lived in California, a community property state. You'll be shocked to hear that they did not file returns. The IRS sent them notices of deficiency (based on substitutes for returns) for the years in question, dividing the income equally between them. Since our heroes didn't file a joint return, the tax, additions and penalties were assessed against each of them separately. The Mottahedehs had a joint trial in Tax Court, at which they complained about the details of the IRS' assessments on several fronts (I've just added people who don't file returns and then complain bitterly about IRS calculations in SFRs to my personal definition of "chutzpah").

One of those multiple complaints matters here: the Tax Court opinion shows that April complained that the IRS attributed half of what she claims was Peymon's income to her. "Under California community-property law the income is community property, not Peymon Mottahedeh's sole property". The Mottahedehs moved to reargue in the TC, devoting an entire section (pp 29-38) to the errors the TC allegedly made incorrectly attributing income to April. Finally, both April and Peymon moved to sever their appeals, because "April Mottahedeh needs to properly and fully address in her Appeal is the alleged error of the Tax Court in assigning half of the income of Appellant Peymon Mottahedeh to Appellant April Mottahedeh".

Despite the presence of hints in the papers that Peymon does not object to all of the community income being assigned to him, this surely looks like a conflict to me. The only way I would even consider joint representation is if I had in my file two separate waivers laying all this out in more detail than I have here, sworn to separately. And I probably wouldn't do it then either. If everything is so hunky-dory between them, why the need to sever the appeals?

Nu?

I agree that it would be difficult to represent both, even with bone-crusher conflict waivers. I do not think that severing the appeals was legally necessary, but may have been requested to improve the optics. If I were April, the last thing I would want is to have my tax case hitched to Peymon's.

As non-filers, the bar that April must reach to avoid liability for community income is rather high. Section 66 provides:

(b)Secretary may disregard community property laws where spouse not notified of community income
The Secretary may disallow the benefits of any community property law to any taxpayer with respect to any income if such taxpayer acted as if solely entitled to such income and failed to notify the taxpayer’s spouse before the due date (including extensions) for filing the return for the taxable year in which the income was derived of the nature and amount of such income.

(c) Spouse relieved of liability in certain other cases
Under regulations prescribed by the Secretary, if—
(1)an individual does not file a joint return for any taxable year,
(2)such individual does not include in gross income for such taxable year an item of community income properly includible therein which, in accordance with the rules contained in section 879(a), would be treated as the income of the other spouse,
(3)the individual establishes that he or she did not know of, and had no reason to know of, such item of community income, and
(4)taking into account all facts and circumstances, it is inequitable to include such item of community income in such individual’s gross income,
then, for purposes of this title, such item of community income shall be included in the gross income of the other spouse (and not in the gross income of the individual). Under procedures prescribed by the Secretary, if, taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either) attributable to any item for which relief is not available under the preceding sentence, the Secretary may relieve such individual of such liability.

The main portion of 66(b) may be a bridge too far at this point, as April does not appear to have ever claimed that Peymon did not notify her of the nature and amount of community income, or requested that the IRS allocate any such income solely to Peymon. The bulk of 66(c) also seems a bit of a stretch because of the requirement that April establish that she had "no reason to know" of the nature and amount of Freedom Law School income. April may be left arguing that she fits within the final (highlighted) sentence of (c) (inequitable to hold her liable), assuming that there may be facts supporting this argument in the trial record.

The Tax Court's findings will not help her. With respect to the operation of Freedom Law School, the Tax Court entered the following findings:

Documentary evidence also establishes that April Mottahedeh helped operate the Freedom Law School by arranging conferences and handling its finances. Her name appears on several checks and money orders received from customers of the Freedom Law School. Checks and money orders from the customers were deposited into her account at Arrowhead Credit Union. There are several hundred pages of these documents. April Mottahedeh's name appears on various legal documents that the Mottahedehs used to conceal their ownership of two properties. To better conceal their ownership, she also apparently wrote letters to lenders under a fake letterhead falsely claiming that she managed property as a trustee.

***

Additionally, April Mottahedeh participated in Peymon Mottahedeh's practice before the California Franchise Tax Board. She helped operate the Freedom Law School, and the record demonstrates that his practice before the California Franchise Tax Board was linked to the Freedom Law School. For example, the website for the Freedom Law School offered assistance to persons involved with disputes with the state taxing authorities such as the California Franchise Tax Board.

While the Mottahedehs attempted to rely on a pre-nup that appeared to eliminate community income, the Tax Court held that it was ineffective to transmute the couple's income from a joint enterprise into Peymon's separate income:

The Mottahedehs have stipulated that they were married during all the years at issue." Therefore, all property acquired by them during the years at issue is community property unless they have agreed otherwise. In October 2001, the Mottahedehs entered into an agreement that contained the following provision:

That Mrs. April Love Mottahedeh hereby, voluntarily and without reservation, conveys to her husband as the personal and separate property ofMr. Peymon Mottahedeh and thereby divests from herself any right, interest or claim to, or in, the community property as set forth herein, effective from the date of this agreement and forward; and that all interest income, stocks, bonds, dividends, wages, income, rental income or other earnings, and realty and personal vehicles which Mr. Peymon Mottahedeh acquired by and through his own labor and/or initiative, or acquires in the future, is now and forever hereafter transmuted from the status of community property to the separate and distinct personal property of Mr. Peymon Mottahedeh, disposable by Mr. Peymon Mottahedeh, with respect to California Family Code Section 770, without the consent of and recourse to the
adverse spouse.

Under the quoted provision, April Mottahedeh disclaimed any community property right to income earned by Peymon Mottahedeh through his "own labor and/or initiative." But the agreement contained no provision regarding ownership of income generated by the couple's joint efforts. And the record establishes that the couple's businesses were joint efforts o both spouses. See supra pp. 12-14. Accordingly, we hold that the income from the couple's businesses was community property and sustain the IRS's determination with regard to this issue.

[The Observer]

I certainly cannot offer an opinion regarding the ethical issue over representing clients who are married to each other and are appealing. But I do recognize that it is a potential problem that could lead to accusations that the attorney failed one or both of his/her clients. I certainly would not want to be involved in a case like this with the likes of Peymon who is likely to be hoping for a misstep by the attorney.

If everything is so hunky-dory between them, why the need to sever the appeals?

A very good question. There were other related items about their marriage in the links you provided, Wes (and thanks for doing so!). Peymon and April got married 11 or so days after her divorce was finalized in 2001 and then she was deeply involved in his scam according to the IRS statements that the appeal references. This included depositing checks into her own separate checking account, handling the organization of Peymon's "rallies" and "conferences", and participated in some trusts that were set up and used to hide the Mottahedehs' ownership of. All of these actions have put April deep into the mud with Peymon and show she had knowledge and did this willingly to conceal income and evade taxes.

I am guessing that after 19 years of this nonsense, April is realizing that this is a horrible way to live, especially given the fact that Peymon's promises of victory at court have failed to come true. I would not be surprised to hear that there has been some very contentious conversations between Peymon and her, and probably an ultimatum delivered about getting her off the hook or she walks out on the marriage. If April was really smart, she would contact the local IRS CI group and try to make a deal to get immunity in exchange for providing evidence and testimony against Peymon. And perhaps Peymon has realized that this is his Achille's heel, so he is pushing for the severance to keep April on his side until he can maneuver against her and throw her under the bus instead.

Ah , love.

[The Observer]

While the Mottahedehs attempted to rely on a pre-nup that appeared to eliminate community income,...

Actually, it was a post-nup (they were married in June of 2001, the court noted the agreement was entered into in October 2001) which is allowed under California community property law. As a rule, the IRS generally allows even post-nups to commute joint property to separate property; such documents don't have to be registered or certified, which gives rise to the question of how wet is the ink on the document when provided as proof of separate property. And the IRS will not honor observation of the state law when there is evidence of hanky-panky going on in trying to hide income or assets.

Section 66 is a killer for April even if she were to be successful in avoiding criminal prosecution. Most spouses in unreported income audits use Sec 66 to file for innocent spouse status based on the fact that their husband or wife was earning income that they were unaware of. However, in many cases that claim fails simply because the spouse was benefitting from the income coming in (purchase of assets and/or rise in living standards that would cause the spouse to realize that there had to be more money coming in somewhere). A declared innocent spouse will be relieved of the liability by the IRS, but April simply cannot maintain before an Exam agent and an Appeals Officer that she simply never knew that money was coming in from Freedom Law School (and Freedom Church). This may be even more problematic since there is no apparent source of income for April; I didn't see any claim that she had a regular wage-paying job or unrelated business. She is probably already aware of this I would guess, when Becraft handled the Tax Court case - and that will be another thorn in the side of their marriage.

[AndyK]

April also has to overcome the (reasonable) presumption that she both directly and indirectly benefited from the income.

[The Observer]

April also has to overcome the (reasonable) presumption that she both directly and indirectly benefited from the income.

Of course. And this is probably going to be another case of Peymon trying to claim that the government has to prove April benefitted. But what he either doesn't understand or willfully ignores is that once the liability had been assessed and established by being upheld by the courts, it is up to the taxpayer to provide proof that they did not benefit. After all, they are the one making that claim, not the government.

[notorial dissent]

JMTCW, but I think the Mrs Lottahooey is just as, if not more so, screwed than her hubby. Pre or Post Nup, I don't see it doing either of them any good, they were both in it together, both benefitted, and were both co-scammers when it comes right down to it. I can't help but see them both as equally guilty here. I can see why the cases were separated, her only/best hope is to dump it all back on Peymon, and I just don't see the court letting her. That being said, I can't help seeing one or the other short a lawyer when Gibbons is told to choose, or else there is going to be some Olympic quality rationalizing to get around the whole conflict thing. I 'm just wondering how long Gibbons will last.

[wserra]

when Gibbons is told to choose

It may not be that simple. For example, when, during the course of a conflicted representation, a lawyer acquires confidences from both clients . . .

[The Observer]

I had the experience of an attorney representing a husband and wife before me, and during our first conversation, pointed out that the couple had filed for divorce. At that point I asked him whom of the two he was going to represent and he maintained he could still represent both of them, despite the fact (which he confirmed) that the divorce was going to be very contentious and that the spouses were not speaking to each other. I wished him good luck and hoped that he would not find himself horribly mired in an malpractice suit later on. Not to my surprise, within the week, one of the spouses arranged for representation from another attorney.

[The Observer]

JMTCW, but I think the Mrs Lottahooey is just as, if not more so, screwed than her hubby.

I'd have to agree. That condition came into play the minute she decided to get legally involved with Peymon. 20 years of it is just compounding her problem. I can't imagine that she is hanging on to him for the sake of the kid(s) that she brought into the marriage since they should be adults by now. Unless she decided to make more babies with him, which again is just compounding her problems even further.

[notorial dissent]

when Gibbons is told to choose

It may not be that simple. For example, when, during the course of a conflicted representation, a lawyer acquires confidences from both clients . . .

True, more likely both to be told to get new lawyers. I would think the ethics issues would be insurmountable.

[The Observer]

True, more likely both to be told to get new lawyers. I would think the ethics issues would be insurmountable.

I guess it depends on Gibbon's ability to be ethical. If I were Gibbons, I'd be telling both spouses that he could only represent one of them in this matter (especially if it looks as though the marriage is on the rocks) and they need to choose quickly. Otherwise, I would withdraw from representation for both of them. And I would certainly not adopt a representation that attempts to defraud the court by maintaining that one spouse has earned all of the income - a spouse that I am supposed to be representing. Too much overwhelming evidence of the joint liability here to think that you can fool a bank of appeal justices.

[Dr. Caligari]

I guess we'll have to see what the briefs when filed, actually argue. If the lawyer persuaded them that the joint income issue was a loser and should be abandoned, then I see no actual conflict that could not be waived.

[notorial dissent]

True, more likely both to be told to get new lawyers. I would think the ethics issues would be insurmountable.

I guess it depends on Gibbon's ability to be ethical. If I were Gibbons, I'd be telling both spouses that he could only represent one of them in this matter (especially if it looks as though the marriage is on the rocks) and they need to choose quickly. Otherwise, I would withdraw from representation for both of them. And I would certainly not adopt a representation that attempts to defraud the court by maintaining that one spouse has earned all of the income - a spouse that I am supposed to be representing. Too much overwhelming evidence of the joint liability here to think that you can fool a bank of appeal justices.

Since I 've never heard of Gibbon before and know exactly, precisely, and absolutely nothing about his ability(s) or ethics quotient I can't speculate there. On t'other hand that he is/was willing to represent both husband and wife at what can only be considered the absolute last possible minute in what is ultimately going to have to turn in to a really nasty adversarial situation, particularly if he's going for a serious defense for her, and then considering who Peymon is, I HAS ME DOUBTS, serious serious doubts about his 1) competence, and 2) his ethics, pretty much in that order.

I can't help wondering how badly this is affecting their marriage, particularly after watching the Happy go Lucky Hendricksons and Kent Hovind & etux. I just don't see this ending well. Not at all, nunh uh!!!! Also, too, doesn't CA still have an equally big claim against them, or has that all been settled?

[The Observer]

Also, too, doesn't CA still have an equally big claim against them, or has that all been settled?

From what I have seen (and that is only based on the state's notice of tax lien that Wes shared here) these were for tax periods that I would have expected to have lapsed due to their age. I believe that California has a ten-year limitation on collection. I am not aware if the state can extend the collection period by obtaining a court judgment for the periods, but again there is no public evidence to show that this has occurred.

I can't help wondering how badly this is affecting their marriage...

I have never seen a situation where a tax liability, regardless of how it came into being, has not damaged a marriage. For the most part it is the wives/ex-wives who suffer the greater harm; they are usually the ones left trying to nurture, protect, feed, clothe and house the children through the economic wreckage that ensues. Damage to the credit rating once the notice of lien is recorded impacts enormously on their lifestyle, not to mention the stigma of owing taxes and having to face family and friends. Depression is common, especially when the husband has either bailed on the marriage or has been kicked out, leaving the wife without any emotional support at a time when she really needs it. For most women, having a home and all of the things that go with it is the one thing that they see as essential to a normal life, even if it is a 900 foot apartment. When all of that gets ripped away due to the stupidity and selfishness of the husband (Ed Brown comes to mind), there isn't a lot for the wife to pick up and put back together.

If the lawyer persuaded them that the joint income issue was a loser and should be abandoned, then I see no actual conflict that could not be waived.

I think that is where this will all collapse. I am guessing that Peymon is trying to convince April and the attorney that the liability should be all his, since he thinks he can beat the government out on collecting it, thus shielding April from the impact of the tax liens. There is no other legal approach on this that I know that is going to work in terms of the Mottahadehs being able to get the appeals court to rule that they owe no liability. They may be able to get some of the liability reduced if Peymon provides accurate financial documentation to show that the IRS calculations were off. But no judge is going to buy an argument that all of that money that was paid to Peymon for conferences, consulting and meetings only belonged to the phony business and church he set up and that he didn't benefit from it.

[notorial dissent]

I think that is where this will all collapse. I am guessing that Peymon is trying to convince April and the attorney that the liability should be all his, since he thinks he can beat the government out on collecting it, thus shielding April from the impact of the tax liens. There is no other legal approach on this that I know that is going to work in terms of the Mottahadehs being able to get the appeals court to rule that they owe no liability. They may be able to get some of the liability reduced if Peymon provides accurate financial documentation to show that the IRS calculations were off. But no judge is going to buy an argument that all of that money that was paid to Peymon for conferences, consulting and meetings only belonged to the phony business and church he set up and that he didn't benefit from it.

I think you are pretty much spot on here. I have always thought that Peymon seriously over estimated his intellect and his abilities. The fact that it took him this long to find a lawyer suggests exactly what you said. I still can't come up with any reading of reality that sees Peymon, at the very least, getting off with no liability, and I really don't see one where April gets off either. There just seems to not be a "real" scenario where it plays out any different. Just because, I can't help wondering what April was thinking when she hitched her wagon to Peymon's fail train. I mean, she may in fact be that naïve and clueless, anything is possible, but...….

I still find it hard to believe that CA passed up a big tax bill, my impression is that just isn't in their repertoire.

[The Observer]

I can't help wondering what April was thinking when she hitched her wagon to Peymon's fail train. I mean, she may in fact be that naïve and clueless, anything is possible, but...….

One possibility is that April just was impressed by Peymon's style and charisma, along with him flashing the "easy" cash he was making. If she was in abusive relationship, it probably made leaving her husband for Peymon seem like a good choice. But this is all idle speculation, and there could be, as you put it, any number of reasons that she made jumped into water over her head. Lots of people pick bad mates, and quite a few them repeat the mistake more than once.

I still find it hard to believe that CA passed up a big tax bill, my impression is that just isn't in their repertoire.

Not that they had any choice, since their law requires them to give up after ten years. But trying to collect on someone who does not have a visible income source, works in cash only, and doesn't really own anything (yeah he had a house, but it was probably mortgaged to the hilt, his car was probably leased, and it never looks good for a tax agency to seize furnishings and clothing and sell it for pennies on the dollar) and you will quickly decide its better to find a fatter pig to slaughter. While it looks as though Peymon got away with this, the sad fact is that eventually the bucks are going to dry up as he gets older, he won't get anything in regards to SSI since he never paid in and life is going to really suck as a senior citizen depending on handouts. I say this because the records so far don't show a ton of money coming in to support the lifestyle he is maintaining now and I doubt he has been able to pack a lot of cash away in an offshore bank.