00:00 Lisa Shoalmire: Welcome everyone to another edition of Aging Insight. This is Lisa Shoalmire and I'm here live in the studio with John Ross. 00:03 John Ross: That's me. 00:03 Lisa Shoalmire: Amazing. 00:04 Lisa Shoalmire: Well, You know John? In another life, I guess, or in a previous career, I should say. I don't know, if many of our listeners know. But I use to be a CPA or I guess I still am, I just don't practice. 00:09 John Ross: Right, that's right. 00:10 Lisa Shoalmire: I don't want people to get the wrong idea. [laughter] But, of course that's a Certified Public Accountant, and I used to help all kinds of people deal, calculate their federal income tax, and fill out tax returns. 00:25 John Ross: Yeah. As a matter of fact, when I finished my degree in accounting, I went to law school because I wanted to be a tax attorney. 00:31 Lisa Shoalmire: So, and of course, if there's any place where there's lots of laws and rules, it's the tax area. There are others who are certainly debating, whether or not to simplify our tax system, and whether we pay the right amount of tax, or too much, or this and that, but... 00:51 John Ross: We pay too much. 00:52 Lisa Shoalmire: Okay. Yeah, just to make that clear. 00:54 John Ross: Just to the side, yeah. [laughter] 00:56 Lisa Shoalmire: But, you know John, the tax law is kind of an interesting thing: Al Capone, he wasn't brought down for his murderous, criminal ways, he was brought down for... 01:08 John Ross: For taxes. 01:09 Lisa Shoalmire: For tax evasion. 01:11 John Ross: Yeah. I had a client one time, when I first got out and started doing tax law, and I had a guy who was a tax evader, tax protester, did not believe in taxes. 01:22 Lisa Shoalmire: Yes, that the 19th Amendment to the Constitution was unconstitutional. 01:26 John Ross: Improperly ratified and... 01:27 Lisa Shoalmire: Was it 19th? 01:28 John Ross: No. 01:29 Lisa Shoalmire: 13th, maybe. Don't know. 01:31 John Ross: I'd have to look at that. 01:32 Lisa Shoalmire: Yeah. 01:33 John Ross: But regardless he did not believe that the IRS had the power to tax him. Unfortunately, it's not what he believes. And within the tax realm, you've got your tax collectors, and then you've got tax collectors that have guns. 01:51 Lisa Shoalmire: Yeah, that's true. That's been a big deal lately. 01:54 John Ross: The IRS Criminal Investigation Division. 01:57 Lisa Shoalmire: Yeah, they have guns and ammo. 01:58 John Ross: They have guns and ammo. And yeah, so yeah, the IRS is serious business out there. 02:02 Lisa Shoalmire: Yeah. So, but this past week we came across a tax court case that really I thought our listeners might appreciate. In the sense that, the facts are egregious, the victim is sympathetic, and the perpetrator of the tax crime here is just despicable. So, I thought we might share that with our listeners today and talk about how... Basically the question is: If you steal money from an elderly family member or a community member, is that taxable? [laughter] 02:51 John Ross: Well, so this case, this is a United States Tax Court case and it came out in April 21st, 2016. So this is brand new stuff. 03:00 Lisa Shoalmire: Yeah for the law, this is brand new. 03:00 John Ross: For law, this is brand new. And The story begins with Art Marsh, and Art Marsh was born in Montana, in December of 1915. 03:13 Lisa Shoalmire: Yes, so that's... Now to me folks, 1915, he quite aged. 03:20 John Ross: Yeah. Grew up on a farm as the fifth of seven children. Mother worked all day doing laundry and preparing meals. His father would tend to the farm, probably with all the kids. 03:33 Lisa Shoalmire: I'm sure that's why you had seven kids. 03:35 John Ross: Not a lot of education, they were very, very poor. 03:39 Lisa Shoalmire: Then the depression came and they were even poorer. 03:43 John Ross: And then, knuckle-scraping themselves through the depression, and then what do you get? World War II. 03:54 Lisa Shoalmire: Which frankly, was an out, it looks like for Art Marsh. 04:00 John Ross: Right, who after Pearl Harbor, signed up, volunteered, as an enlisted man, went off to war, got back. And like so many of that greatest generation, was able to use his GI Bill, coming out of World War II to go back and get himself a college education. Probably one of the first in his family, if I were guessing. 04:25 Lisa Shoalmire: I would guess. And so, he actually became an optometrist, a doctor of optometry. 04:32 John Ross: Yeah. Moved to the city of Gilroy, California. 04:37 Lisa Shoalmire: That's where they have the Garlic Festival. 04:39 John Ross: Is it? 04:41 Lisa Shoalmire: Yeah. 04:41 John Ross: How did you know that? [chuckle] 04:41 Lisa Shoalmire: Because, I know random trivial facts. 04:43 John Ross: Yeah, that is... [chuckle] 04:46 Lisa Shoalmire: But Gilroy, California... [chuckle] 04:48 John Ross: Anyway, so Dr. Marsh has... He's got his optometry practice, has a successful upper middle class lifestyle. 05:00 Lisa Shoalmire: Yeah. And Gilroy... California after the war was certainly a booming state, and Gilroy and Dr Marsh, they also benefited from "the boom" of this. And so, like you say, he became a upper middle class gentleman, but he never lost his respect, and his memories of those very poor years. 05:32 John Ross: No. Throughout his life, first of all, he never married and he never had any kids. But he did lots of vacations with his brothers and sisters, and stuff like that. 05:44 Lisa Shoalmire: Nieces and nephews. 05:45 John Ross: Nieces and nephews. But he lived very frugally. 05:51 Lisa Shoalmire: Yeah. So the tax court describes that Dr. Marsh, he lived in the same second floor apartment in Gilroy, California, which was an 800 square foot apartment. And he lived there for years, and years, and years. And he lived a very modest life, I mean this was a sparsely furnished apartment and... 06:13 John Ross: Yeah. In his retirement, that apartment cost him $175 a month. 06:21 Lisa Shoalmire: In California. 06:22 John Ross: In California. [chuckle] 06:24 Lisa Shoalmire: Which is really amazing. 06:24 John Ross: And this is not an old case. This is even during his retirement. And despite his earnings as an optometrist throughout his life, when he retired, he basically didn't even spend the self-security money that was coming in. 06:39 Lisa Shoalmire: Right. So he got by on his social security, and still put a little bit in the bank. But he'd accumulated by the time he retired, over a million dollars, and with his investments and things... 06:53 John Ross: And that was in the 80s. 06:55 Lisa Shoalmire: Right. So, by the time... A lot of the facts in this case, that investment had grown to about three million dollars. 07:01 John Ross: Yeah. So, here's a guy who retires in the 80s with a million bucks, and 20 years, 30 years later, he's got three million dollars. He's making money in retirement, because... You know, one of the easiest ways to make money? Is don't spend it. 07:16 Lisa Shoalmire: Right. [chuckle] Well, and Dr. Marsh clearly got that message. Some of his friends would kinda joke with him about, how "frugal" he was. But he would just say, "Hey, my savings is my insurance. I don't ever wanna have to need nursing home care. I plan to stay in my apartment. And so my savings is a way that I'm gonna make sure that I can do that." 07:40 John Ross: Yeah, that's right. Once we start getting into the 2000s, a number of things... Again, we're talking, this man was born in 1915, so by the year 2000, he's 85. So we're rolling into the late 80s, early 90s and his, of course his brothers and sisters that were really his big family... 08:04 Lisa Shoalmire: Yeah, they start dying off. 08:06 John Ross: They start dying off. 08:08 Lisa Shoalmire: And he starts having some of his own health challenges. He fell and he broke a hip at one point. So he had to start using a walker, and he lived in a second floor apartment. And this was what you would call a "walk-up" apartment. 08:22 John Ross: Right. So no elevator, or any of that sort of business. 08:26 Lisa Shoalmire: So, essentially he became very home-bound... 08:28 John Ross: Couldn't drive... 08:29 Lisa Shoalmire: Yeah. He had heart problems, some hearing loss, some arthritis. The time catches up with everyone. And it was finally catching up here with Dr. Marsh. 08:40 John Ross: Yeah, so about 2007, Mr Marsh is 91 years old. He can't drive, can't get to the doctor on his own, can't prepare his own food. He's got some incontinence, got some heart problems, got chronic back pain, hearing loss. He's even had a mild stroke, and he's looks like he's starting to show some signs of dementia. 09:06 Lisa Shoalmire: Right. So, he's got some poor short term memory and even his long term memory is affected. He really can't perform simple arithmetic, like balancing a check book, that just requires simple arithmetic. But we're at a point now, where he has trouble with that, and... 09:27 John Ross: Yeah. And so here we are it's January 2007, and Dr. Marsh gets admitted to St. Louise Regional Medical Hospital for dehydration. His Doctor... They know he lives alone... 09:41 Lisa Shoalmire: In a second floor apartment. 09:43 John Ross: In a second floor apartment. They know he has no family. And basically, the Doctors are saying look, "There's no way, you're going to be able to go back home without help." Now Lisa, in our speeches all the time we say, "Here's what we see, we see you have a health crisis." And what immediately happens after that health crisis? 10:06 Lisa Shoalmire: Yeah. That turns into a housing crisis. 10:08 John Ross: A housing crisis. Because you're at the hospital, or the rehab and somebody says, "Look, you can't stay here because we've done everything we can for you, but you can't go home, not like you did before you got here. You're just not well enough." 10:25 Lisa Shoalmire: Right. Or you need too much supports, or whatever it is. So it's now we have a housing crisis... And that's the position Dr. Marsh found himself in. And so he's desperately trying to figure out how he's going to return home to his beloved apartment, and figure out how he's going to get by. 10:44 John Ross: Yeah. And enter Angelina Alhadi. All right, stick around after the break will keep going with our story. [pause] 11:15 John Ross: Welcome back to Aging Insight everybody. We're talking today about a situation where we have this gentleman, Dr. Marsh, very frugal man throughout his life. Single, no kids, retired in the 80s. But, still lived very frugally, until he had accumulated a couple of million bucks for his retirement needs, that he was gonna use to keep himself out of a nursing home. 11:43 John Ross: This independent guy don't spend a lot of money, but health caught up with him. And by 2007, when he is 91 years old, he has eventually gotten to the point where he's got some cognitive dysfunction. His physical health is a train wreck. He still lives in this little cheap two-storey, or a second floor apartment, that he can't even get into or out of. And he is at the hospital, and the doctors are basically saying, "Look, you just can't go home. I mean you don't live in a home that you can go back to. You're gonna have to figure something out." And here comes Angelina Alhadi to the rescue. 12:26 Lisa Shoalmire: Right. So, while Dr. Marsh is convalescing at the hospital, and considering his very limited options, Angelina Alhadi... She slips him a note and says she was an employee of the hospital, a nursing assistant. And even though, the hospital had a policy in place that their employees could not moonlight or work for patients. She slipped a note to Dr. Marsh, saying that she had heard that he would not be able to go home without help, and she was willing to become his primary caregiver. 13:06 Lisa Shoalmire: And so, she was supposed to prepare his meals, bathe him, make sure he took his drugs properly, provide basic nursing services, shop for groceries, do his banking, drive him where he needed to go, help him get in and out of the apartment, as needed, keep the apartment clean, do laundry, and provide companionship. 13:29 John Ross: Yeah, and let's be perfectly clear. If Dr. Marsh did not have somebody to provide these services, he was going to have to go to a nursing home. 13:41 Lisa Shoalmire: Which he did not want to do. 13:42 John Ross: And he certainly didn't wanna do. So, he jumps on this, he says, "You know what? This is why, I've saved my money." 13:48 Lisa Shoalmire: Right. So, he hires Miss Alhadi, who was a... She'd immigrated to the United States from the Philippines. 13:55 John Ross: Yeah. Was married but estranged from her husband. Looks like Filipino background, but clearly part of the small Muslim community from the Philippines, based on the last name. And I think, she typically wore hijab and stuff like that. So she's a Muslim Filipino lady and here she is immigrant, and she's going to get hired. She's got this great new job that she has convinced Dr. Marsh to hire her. And she is going to get paid $6,000 a month. 14:33 Lisa Shoalmire: Well, and of course initially it was even less than that. Her first month, Dr. Marsh paid her the going rate, I guess of about 3,750 bucks. But that was the only time he paid her such a small amount. And then from then on, the next month it was $6,000. And then he would give her $1,000 additional a month for groceries. Even though he himself didn't use $1,000 [chuckle] a month in groceries. 15:02 John Ross: Right. He had rarely needed more than $400 to feed himself, and yet he's writing her checks for $1,000, in order to buy groceries. 15:13 Lisa Shoalmire: Now, and she was hired in April... Excuse me, she was hired in January, but by April he had... 15:20 John Ross: January, February, March, April. We're four months into it. 15:23 Lisa Shoalmire: Dr. Marsh wrote her a check for $100,000 and bought some expensive equipment for her, and then, gosh, Mrs. Alhadi's lifestyle began to increase. 15:38 John Ross: Yeah, she's doing alright now. Yeah, by 2007, Mrs. Alhadi had... 15:44 Lisa Shoalmire: In June, so again, hired in January, by June of 2007. 15:48 John Ross: Yeah, Dr. Marsh has made a down payment on a $1 million home in Gilroy, California for Miss Alhadi. 16:02 Lisa Shoalmire: Yeah. By November of that year, so 11 months into their arrangement, he had written her checks which added up to about $400,000. 16:13 John Ross: Because not only did she convince him to make the down payment for her, but then he also immediately... She turned around and said, "Oh, but you know what? I can't afford the mortgage payments. You're gonna have to help me with those too." 16:26 Lisa Shoalmire: Yeah. So, she bought $7,000 worth of furniture, she spent $34,000 on landscaping at her new million-dollar home. 16:38 John Ross: Yeah. And, you know what? You know what goes good in a new million-dollar home? 16:44 Lisa Shoalmire: A brand-new swimming pool. [chuckle] 16:45 John Ross: A brand-new swimming pool, one that costs $73,000. This is starting to sound like she's about to win a prize on... [chuckle] 16:56 Lisa Shoalmire: Yeah, that's right. 16:56 John Ross: The Price is Right. 16:58 Lisa Shoalmire: Well, apparently, she thought she had. 17:00 John Ross: Yeah. So, you should start... Yeah, you should be getting a picture here of what's going on. And to be perfectly honest, it actually gets worse from here. So we're gonna take our bottom of the hour break, and when we come back, we're gonna keep talking about this situation, so stick around. [pause] 17:33 Lisa Shoalmire: Welcome back everyone, this is Lisa Shoalmire, here with John Ross on Aging Insight. And today, we are talking about the case of Dr. Art Marsh, which has been detailed quite well, in of all things, a tax court opinion. And so, so far, we've gotten up to Dr. Marsh had accumulated a nice little nest egg for retirement. And he's now gotten to his 90s and his health is bad, and he needs care services to remain in his home. And a nurse assistant at the hospital he had been admitted to, offered her services and within... Hired in January of 2007 and by November of 2007, Dr. Marsh has given her, transferred to her, paid on her behalf, half million dollars of expenses and just... 18:35 John Ross: Including buying a new house, all kinds of stuff. 18:39 Lisa Shoalmire: Yeah, and then it looks like she convinced him, too. She told him that she had won a cruise. [chuckle] Miss Alhadi... 18:48 John Ross: Yeah. She comes in and says, "Hey, Dr. Marsh, guess what? I've won a cruise and I want you to come with me." 18:56 Lisa Shoalmire: Right. And so apparently they do do the cruise, but of course, she had not won a cruise at all. 19:02 John Ross: And so, again, I wanna play this out, "Hey, Dr. Marsh," now remember, Dr. Marsh at this point is trapped. He's in a second floor apartment, he cannot get downstairs, he cannot drive, he cannot feed himself, or clothe himself, or bathe himself. So she comes in and says, "Guess what Dr. Marsh, I won a cruise. And if you stay here, there's nobody to take of you. But I really want you to come with me. But of course, you'll have to pay for yourself, and of course the cost to pay for yourself is... " 19:37 Lisa Shoalmire: $25,000. 19:38 John Ross: Yeah. [chuckle] 19:39 Lisa Shoalmire: So of course, Dr. Marsh and Miss Alhadi, and her whole family take a nice cruise, but... 19:49 John Ross: Although she basically, according to the statement, she just leaves him in his room for the entire cruise. 19:54 Lisa Shoalmire: Right. Now, Dr. Marsh did... He still had some family, of course they lived off. He had a niece in particular who would contact him every Sunday evening, and check-in on him. And this niece, with Miss Alhadi taking care of Dr. Marsh, suddenly she wasn't able to get in touch with him as frequently. 20:18 John Ross: Yeah. He seemed to always be asleep. 20:21 Lisa Shoalmire: Yes. 20:22 John Ross: Or he just wasn't feeling well. 20:23 Lisa Shoalmire: Or the phone would ring and ring, and where is he going to be? 20:26 John Ross: Right. 20:27 Lisa Shoalmire: So, the niece actually got... She got concerned, but she didn't know what the situation was exactly. But the caregiver, Miss Alhadi, she used this isolation and she would express her affection to Dr. Marsh. She would tell Dr. Marsh, how much she loved him and how he was family to her, even suggested they get married, or that he come live with her. And then, she would cry on his shoulder about her financial struggles, and how she was worried about taking care of her children. And so Dr. Marsh, I mean, he certainly had a connection with her, and she certainly cultivated that. 21:14 John Ross: Yeah. Just sit around and cry, and I bet there's people listening to our show out there that have had this similar type experience. 21:22 Lisa Shoalmire: Yes. A child, a grand-child, coming in. 21:25 John Ross: So talk about how bad their life is and if only they could just get a little of yours... 21:31 Lisa Shoalmire: Yeah, a little extra money would go a long way. 21:33 John Ross: That might help. 21:34 Lisa Shoalmire: Well, when it came time in 2007, for Miss Alhadi to file her taxes, she reported only her income from her "real" job. 21:47 John Ross: Yeah, her real job at the hospital. 21:49 Lisa Shoalmire: Yeah, and that's all she reported to the IRS. 21:54 John Ross: Failed to mention any of the other stuff. The hundreds of thousands of dollars that she'd received. 22:01 Lisa Shoalmire: But remember in 2007, she applied for a mortgage for a million-dollar house and you know, nursing assistants don't get paid a whole lot. But on her mortgage application for this house, she put down that she earned 15,000 a month. 22:18 John Ross: Yeah. $7,500 from her job at the hospital, and $7,500 from her second job with Dr. Marsh. 22:24 Lisa Shoalmire: And of course, that certainly didn't even cover what she really received. But in the fall of 2008, Dr. Marsh wrote Miss Alhadi checks that totaled nearly $800,000. 22:40 John Ross: So by 2008, he has given her eight... So again, you gotta remember, she's been working there for two years, basically. She's been working there for two years and during this two years, he has written her $800,000 worth of checks. 22:55 Lisa Shoalmire: Yes. And that doesn't even count the other things that he had paid for. But there's never enough. 23:01 John Ross: Yeah, that's the funny thing about greed. If I just pull that slot machine handle one more time, the next one will be the big one, right. And that's all Miss... I would say, Aladi, Alahottie, Alhottie, whatever. I would say that she's basically, she's addicted to it at this point. 23:23 Lisa Shoalmire: Right. She's got lifestyle choices that she's made, that she needs this money. So she finally just goes all in, and she has Dr. Marsh write her five checks totaling a $100,000 each. 23:36 John Ross: Yeah. So half a million bucks. 23:37 Lisa Shoalmire: All at one time, essentially. And, well, Dr. Marsh, all of his money for the most part was with the financial company Vanguard. 23:50 John Ross: Yeah, a lot of times... Vanguard is one of these where, if you just kind of wanna pick your own mutual funds and things like that, you can kind of do it. They usually are a lower-fee version, and for somebody like Dr. Marsh who was a historically very cheap person, it kind of makes sense. 24:08 Lisa Shoalmire: Yes, so these checks are put through to Vanguard, and Vanguard holds them. They think, "Hmm, this is a little odd for our client here, because he's never really taken out such large sums." So Vanguard checks... 24:25 John Ross: You know, I go on vacation and swipe my credit for $25 in some... 24:31 Lisa Shoalmire: In a strange locale. 24:32 John Ross: In some strange town and I can't use my credit card anymore for 24 hours, because I've gotta call the security hotline. 24:39 Lisa Shoalmire: Right. So Vanguard here, their fraud unit gets involved to check to make sure this is all correct. And when they call and reach out to Dr. Marsh, who's with him? 24:51 John Ross: Of course. 24:52 Lisa Shoalmire: Of course, Miss Alhadi. And so did you know, John, that Vanguard records every single one of their conversations? 25:00 John Ross: Well, I bet. I bet most people when they hear that little thing that, "Your call may be recorded for quality assist... Assurance purposes." Yeah, you're probably just like, "Oh yeah, maybe they record some calls." Well, apparently at Vanguard, they record them all and they keep them. 25:14 Lisa Shoalmire: And they keep them so, then the tax case that we'll talk about... The calls actually were brought into evidence. And on these calls you could hear Miss Alhadi in the background, telling Dr. Marsh what to say. Being very specific about her knowledge of his accounts, and what he had in those accounts, and even cajoling and pressuring Dr. Marsh to say the right things to the Vanguard representative, as far as Miss Alhadi was concerned. And at one point, Dr. Marsh talking to the Vanguard rep, says, "Well, I don't think those... There wasn't five checks, and they weren't for $100,000. I think it was just one check for $10,000." 26:01 John Ross: Right, and you got Miss Alhadi in the back... 26:05 Lisa Shoalmire: Saying "No, no, you wrote them. Remember, you tell them." 26:07 John Ross: Yeah and, "You tell them, or you're gonna get me in trouble. You tell them." Now at trial, Miss Alhadi testified that she didn't know anything about his finances. 26:20 Lisa Shoalmire: Right. She's just an angel, she knew nothing specifically. She just accepted his generosity. 26:26 John Ross: I liked the five word paragraph in the tax court opinion, "We don't believe her." 26:31 Lisa Shoalmire: Yeah. Hey, there are some judges that will just come right out and say what they think. So ultimately here, Vanguard did not honor the checks, and this is where everything starts falling apart. Because Vanguard then reaches out to, essentially, adult protective services there in California, and suggests that there's some financial abuse, and elder abuse going on here... 26:57 John Ross: Yeah, they stick an investigator on it who goes out, and then interviews Dr. Marsh. 27:05 Lisa Shoalmire: And who clearly cannot... He cannot describe the amounts of money that he's given to Miss Alhadi. 27:12 John Ross: Yeah, in fact when the investigator asked him about the five $100,000 checks, Dr. Marsh is insistent that he did not write them. 27:21 Lisa Shoalmire: Right. That's crazy talk, he would never do such a thing. 27:24 John Ross: He would never do such a thing. 27:25 Lisa Shoalmire: And so during this investigation, Miss Alhadi made one last stab to try to get control, and this is where she took him to an attorney, to get power of attorney over him. And what I love about the way, this story comes out, and John, we have been in this attorney's shoes. 27:48 John Ross: Been there before. 27:49 Lisa Shoalmire: And the attorney quickly realized what was going on here and refused to assist in this scheme, and also talked privately with Dr. Marsh about what he was doing in wanting... Suggested some other ways to protect himself, and even tried to get Miss Alhadi to return the money that she had been given by Dr. Marsh. 28:20 John Ross: Yeah. And her response is, "Why should I? He gave it to me. It's my money." 28:26 Lisa Shoalmire: We've heard that a time or two. 28:28 Lisa Shoalmire: Have, as a matter of fact. 28:30 John Ross: So let's take a break, but eventually we're gonna talk about how the tax court got involved in this case and what resulted, so stick around. [pause] 28:22 John Ross: Welcome back to Aging Insight, we're talking about Dr. Marsh, who's clearly being scammed by this woman, Angelina Alhadi, who has stepped in as a caregiver and then immediately started taking advantage of him to the tune overall of about a million bucks. And isolating him and all of this sort of stuff, essentially gets busted because she got too greedy. 28:53 Lisa Shoalmire: Right. That's one thing that I've always heard John that, "if you just do it a little bit, you may not ever get caught." But most people if they're greedy, they can't hold themselves back. 29:06 John Ross: Once you get away with it that first time, your mind says, "Well, I'll just do it one more time." And that one more time comes and bites you, and that's what happened here. So we've got the Adult Protective Services for California who are involved. 29:21 Lisa Shoalmire: Yeah. Who've come in to see that the care given by Miss Alhadi was very deficient: There was a very unclean apartment, there were urine stains on the floor. 29:32 John Ross: The food was rotten. 29:34 Lisa Shoalmire: Ants. So terrible care. And so by February of 2009, Dr. Marsh really mercifully passes away at age 93. 29:48 John Ross: Yeah. The County had stepped in, had become his guardian, they managed his funds until his death, there shortly after in February 13, 2003. And he was age 93, at the time of his death. So yeah, basically 2007, 2008, he was getting robbed, and the first part of 2009, he's gone. 30:06 Lisa Shoalmire: Yeah. So he passes away. I thought this was an interesting side note in the tax court opinion talked about how the scene at the funeral. How Mrs. Alhadi came to the funeral, number one, she came to the funeral clearly no shame, but she came dressed in a full hijab and carrying a single red rose. And she tried to crawl into the coffin of Dr. Marsh and she was screaming, and crying, and tearing at her clothes. And the tax court noted that this was the last contact that Mrs. Alhadi had with Dr. Marsh. [chuckle] 30:47 John Ross: Yeah, wow. So, once he's gone, essentially the city or the Santa Clara County, I guess the County who'd been managing the guardianship, they'd been managing the funds, they'd been managing a trust that had been set up. And so, they sue... 31:09 Lisa Shoalmire: Well they sent 1099 tax forms. 31:14 John Ross: Right. Yeah, they start by suing Alhadi to get whatever she's got left, and that part is settled, she returns about $300,000 in cash. 31:25 Lisa Shoalmire: Yeah. Her million-dollar home, since Dr. Marsh wasn't there to make her mortgage payments, that... 31:30 John Ross: Yeah, the million-dollar home, poof. 31:31 Lisa Shoalmire: Gone, yeah, foreclosed. So there's nothing to come back there. So about $300,000 in cash was all that came back... 31:37 John Ross: But that leaves about $700,000 that he paid her for the years 2007, 2008. And if you're a fiduciary, if you're in charge of somebody's money like that, you have tax reporting requirements. And one of those is, if there was an employee, you send them a 1090... Or not an employee, an independent contractor like this. You send them a 1099. 32:07 Lisa Shoalmire: So they did. So do you think that Miss Alhadi had... Number one, she had not reported this income previously. And of course, she doesn't have the money to pay the tax, so this is where the tax court comes in. And so their discussion is about... Instead of the criminal maltreatment and theft from Dr. Marsh, the tax court here is talking about, "What are the tax consequences of Miss Alhadi's behavior?" 32:30 John Ross: Yeah, I guess the first thing is, is it income? 'Cause Miss Alhadi, she says, "Well, he gave that to me". 32:48 Lisa Shoalmire: Yeah, well, "If he didn't give it to me, it was a loan." 32:50 John Ross: Yeah. If it wasn't a gift, then it was a loan. 33:00 Lisa Shoalmire: And she had also done a hand written note, all in her own hand writing, that she had had Dr. Marsh sign, that, "Any loans that he may have given her during his lifetime would all be forgiven." 33:07 John Ross: Right. So it's a loan, it was a loan, but it's been forgiven. So I don't have to pay it back. 33:07 Lisa Shoalmire: So John, was this income? 33:13 John Ross: Yeah. Absolutely. The tax court says, "First of all, it's not a loan." 33:15 Lisa Shoalmire: Yeah. There was nothing to indicate a loan. 33:27 John Ross: There's absolutely nothing to indicate that it was a loan. There was no interest. There was no payment schedule. There were no payments. There was nothing. It's so not a loan, that it's even ridiculous to talk about the fact that it might be a loan. 33:31 Lisa Shoalmire: Was it a gift? 33:31 John Ross: Now, was it a gift? Now this is actually, a little bit harder question. 33:36 Lisa Shoalmire: Because in this court opinion, the tax court heard from experts. They heard from a neuropsychologist that had assessed Dr. Marsh. And talked to him about his relationship with Miss Alhadi. And there was definitely a connection, an emotional bond between these two people. And most often, gifts are given because we have an emotional bond with... The donor has an emotional bond with the receiver of some kind. 34:07 John Ross: Yeah. I was looking at part of this, and it says Dr. Marsh in some of his testimony, and talking to the doctors and things, he felt like he was the luckiest man in the whole world. 34:27 John Ross: Yeah. He had somebody to care for him in his old age. And he felt loved for the first time in his life. That's what he reported to the neuropsychologist. 34:49 Lisa Shoalmire: Yeah. So I think he really did. When I read that, it made me think like the little beaten puppy. 34:49 John Ross: That will always come back. 34:49 John Ross: It'll always come back. Doesn't matter, how hard you hit it, or beat it, that little puppy will still come back wagging its little tail. And that's basically, what the tax court said, which is, "When you lack the mental capacity to understand, what's going on around you, and all of these sort of things. There's really not any way, you could make a valid gift." 35:17 Lisa Shoalmire: Yeah. The tax court came back and said, "There can be no disinterested generosity, in the presence of coercion or undue influence. And the tax court had the benefit of hearing these Vanguard tapes, where they heard that Miss Alhadi... 35:34 John Ross: Heard her screaming at him in the background. 35:34 Lisa Shoalmire: Right. And so they said, "He may have thought he was saving her, and being generous, and doing it out of his own generosity, and his heart." But, we see the bigger picture, and there was clearly undue influence and coercion here. 35:49 John Ross: Yeah. And basically, if there is undue influence according to the tax court here. They're saying, "if there's undue influence, there really cannot be a gift." 36:05 Lisa Shoalmire: And the court goes on to say that "the wild spending" that Dr. Marsh went on, when he connected up with Miss Alhadi was so abnormal for him, over his 90 previous years, that that was strong evidence of undue influence. Because left to his own decision making and his typical personality he would never ever, ever, have spent the kind of money, $25,000 on a cruise, or $70,000 on a swimming pool at a home he didn't even own. That was just so out of character that clearly it was undue influence. 36:42 John Ross: Yeah. And if you look at the rules on undue influence, and what they typically take into account in looking at that sort of thing. Was there a position of trust? Did they abuse that trust? And all of that. This is one of those cases, where it's just so obvious. 36:56 Lisa Shoalmire: Well, and one of Miss Alhadi's defenses was that Dr. Marsh didn't seem upset by all this money. He was glad to give it. 37:05 John Ross: Yeah. He was happy about it. 37:06 Lisa Shoalmire: Yeah. And the tax court said, "Look, the lack of outrage or disgust at Miss Alhadi's behavior by Dr. Marsh, that does not exonerate her. In fact, all that means is that she chose her victim very well." [chuckle] That's what the court said. 37:30 John Ross: Well and anybody that's ever dealt with domestic violence can probably... Can see some of this where you have a... In my little stint in the military police, when I got back from my first deployment. I experienced some domestic violence situations on base where, they just wouldn't report. You knew it had happened but they were not going to get that other person in trouble. 38:00 Lisa Shoalmire: And they in fact were gonna protect that person. 38:00 John Ross: And they in fact were going to protect them. In some cases, violently protect them even though that's their abuser. And that's basically, what the tax court said in this situation as well. 38:31 Lisa Shoalmire: Yeah. So the tax court came back and found it to be taxable income to Miss Alhadi. And then found that she was self-employed. 38:24 John Ross: Yeah. They said, "Not only is that income, so you had definitely income. And it is self-employment income." Which for you, non-tax specialists out there, that means some more money to the IRS. 38:34 Lisa Shoalmire: That's right. And then they say that the years for 2007 and 2008, that she had filed fraudulent tax returns, because she had not... She had failed to report the income. So I guess, her and Al Capone now have something in common. 38:48 John Ross: Yeah. 'Cause once you start getting into the fraudulent tax returns, stuff like that, the IRS got some big mitts to punch you with. 39:00 Lisa Shoalmire: Yeah. And the court, just clearly did not like this lady, Miss Alhadi... 39:06 John Ross: Nor do I. 39:07 Lisa Shoalmire: And no. And so, they used what limited jurisdiction they had to punish her. Which was to find this income tax was owed, and that she had committed fraud and that... You don't want your IRS on your tail for that. 39:22 John Ross: That's right. So if you're out there scamming the elderly, it ain't just about scamming the elderly remember, they're lots of people that can come get you. 39:30 Lisa Shoalmire: District attorneys and IRS. 39:31 John Ross: District attorneys. 39:3 2 John Ross: But that IRS, that's a big one. They could even get Al Capone [laughter] and they can get you. Appreciate everybody listening, hope you enjoyed the show today. We'll see you next time.