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Wednesday, Oct 10 2012

Abel Maldonado's $3 Million Bogus Tax Write-Offs

Oct 10, 2012

IRS Claimed Agro-Jal Owed Over $3 Million In Deficient Taxes In 2006 And 2007 Due Partially To Wrongful Deductions. According to a U.S. Tax Court petition filed by Agro-Jal in July 2010, the IRS alleged that the company underpaid its taxes by over $3 million in 2006 and 2007, largely due to tax deductions that the IRS disallowed following an audit. Specifically, the IRS claimed that Agro Jal owed a $1,115,440 deficiency for 2006 and $2,172,800 in 2007 [Agro-Jal Farming Enterprises Inc. v. Commissioner of Internal Revenue, Docket No. 15103-10, Petition, filed 7/2/10]

IRS: Agro-Jal Had Pattern Of Deducting Expenses For Properties Unrelated To Business. According to the Form 886-A provided by the IRS to Agro-Jal, the company had established a pattern of wrongfully deducting expenses unrelated to its actual business. These deductions included expenses for repairs and improvements at Maldonado’s home, the home of his brother and sister, and his mother’s home. The IRS alleged the properties were owned by Tri-M, a separate company set up by the Maldonado family, and were not owned or directly utilized by Agro-Jal. The IRS alleged: “It has been well documented that the taxpayer has a pattern of deducting expenses that pertain to real property which it does not own, lease, or conduct any company business of any kind.” [Agro-Jal Farming Enterprises Inc. v. Commissioner of Internal Revenue, Docket No. 15103-10, Petition, Exhibit A, filed 7/2/10]

Agro-Jal Sued IRS In U.S. Tax Court, Claiming It Did Not Owe Any Back Taxes. In July 2010, Agro-Jal filed a Petition with the U.S. Tax Court alleging that the IRS’s determination of back taxes was wrongful, and asked the court to find that the corporation did not owe back taxes for 2006 and 2007. [Agro-Jal Farming Enterprises Inc. v. Commissioner of Internal Revenue, Docket No. 15103-10, Petition, filed 7/2/10]

  • Agro-Jal Claimed Deductions, Expenses Were Proper. Specifically, Agro-Jal cited 18 instances where the IRS either disallowed deductions or overstated Agro-Jal’s income. These included disallowing deductions for business expenses, wrongfully increasing taxable income due to a change in accounting for the costs of cartons and crates, and erring in determining or accessing a pass-through loss to Agro-Jal’s shareholders. [Agro-Jal Farming Enterprises Inc. v. Commissioner of Internal Revenue, Docket No. 15103-10, Petition, filed 7/2/10]

IRS Found Laura and Abel Maldonado Under-Reported their Income Between 2006 and 2008 by $1.8 Million. For tax years 2006, 2007, and 2008 the IRS alleged Laura and Abel Maldonado under-reported their total taxable income by a net total of $1,809,38.  The IRS alleged the Maldonados under-reported their total taxable income by $1,422,276 for the tax year ending December 31, 2006, over-reported total taxable income by $207,837 for the tax year ending December 31, 2007, and under-reported total taxable income by $594,942 for the tax year ending December 31, 2008. [Maldonado and Maldonado v. Commissioner of Internal Revenue, Docket No. 15102-10, Petition, Exhibit A, Form 4549-A, Income Tax Discrepancy Adjustments, Line 2, filed 7/2/10; Maldonado and Maldonado v. Commissioner of Internal Revenue, Docket No. 3926-11, Petition, Exhibit A, Form 4549-A, Line 2, filed 2/15/11]

Maldonado: “I Believe we Paid the Correct Amount,” but “If the IRS Finds Differently, I will Pay the Taxes Due with Interest.” In April 2012, Maldonado responded to U.S. Tax Court cases, saying “I believe we paid the correct amount of taxes and followed the rules as we understood them. If the IRS finds differently, I will pay the taxes due with interest.” [San Luis Obispo Tribune, 4/5/12]

Examples of Disallowed Agro-Jal Deductions

Date

Details

Benefiting

Amount

8/23/2006 Tiling at Maldonado’s family home. Maldonado $10,164.42
10/25/2006 California Closets contract with Maldonado’s wife. Maldonado $2,118
10/25/2006 Expenses for Maldonado’s family home. Maldonado $8,769.07
8/28/2007 Tiling at Maldonado’s home. Maldonado $4,444
8/30/2007 Mahogany tile for Maldonado’s home. Maldonado $5,603
9/11/2007 900 square feet of courtyard flagstones for Maldonado. Maldonado $4,800
9/18/2007 Deck sealing tools and supplies at Home Depot for Maldonado. Maldonado $732.54
12/17/2007 Reimbursement to Maldonado for expenses at Home Depot, money paid to Joe Tosoro for work around his personal house. Maldonado $3,495
9/20/2007 Bathroom work at Maldonado’s house. Maldonado $1,361.23
9/5/2006 Bathroom fixtures at Patty Ponce’s home. Maldonado’s Sister $6,911.30
7/11/2007 Home furnishings at Patty Ponce’s home. Maldonado’s Sister $10,568.12
5/24/2007 Roofing for Patty Ponce’s home. Maldonado’s Sister $19,900
6/14/2007 Aquarium installation at Frank Maldonado’s home. Maldonado’s Brother $26,029.43
6/20/2007 High tech electronics installation by Smart System at Frank Maldonado’s home. Maldonado’s Brother $33,500
6/25/2007 Installation of large bronze mirror at Frank Maldonado’s home. Maldonado’s Brother $1,608.39
7/31/2007 Landscaping at Frank Maldonado’s home. Maldonado’s Brother $2,784.85
9/10/2007 Delivery of large bronze mirror at Frank Maldonado’s home. Maldonado’s Brother $2,789.29
12/21/2007 Work on Frank Maldonado’s fish tank. Maldonado’s Brother $575
10/18/2007 Carpet installation at Maldonado’s mother’s home. Maldonado’s Mother $7,850
11/19/2007 Vinyl window installation at Maldonado’s mother’s home. Maldonado’s Mother $557.83
11/30/2007 Bathroom fixures at Maldonado’s mother’s home. Maldonado’s Mother $2,495.88
12/21/2007 Cabinets for Maldonado’s mother. Maldonado’s Mother $1,350
9/20/2007 Bathroom work at Maldonado’s house. Maldonado’s Mother $1,361.23
10/26/2007 Bathroom remodel at Maldonado’s mother’s house. Maldonado’s Mother $1,512.61
9/30/2006 Expenses pertaining to country club property in La Quinta. Agro-Jal $5,243.65
8/12/2007 Linens and furniture for country club property. Agro-Jal $4,825.04

[Agro-Jal Farming Enterprises Inc. v. Commissioner of Internal Revenue, Docket No. 15103-10, Petition, Exhibit A, filed 7/2/10]


Published: Oct 10, 2012

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