Last revised 03-15-2010
All blue highlighted text links to
additional notes and information
All blue highlighted text links to
additional notes and information
"Just because something is
legal, doesn't mean it's
right..."
legal, doesn't mean it's
right..."
Here is why...
This page is
incomplete and still
being worked on...
incomplete and still
being worked on...
For a brief
summary
go to this
link...
The following letter was written to clarify the
circumstances that lead to my becoming so entangled in
tax obligations.
As they were presented in the Observer article, some
readers commented that "it didn't add up," or "how did it
get that way."
This was my attempt to explain in brief:
(scroll down...portions of the letter have been redacted)
circumstances that lead to my becoming so entangled in
tax obligations.
As they were presented in the Observer article, some
readers commented that "it didn't add up," or "how did it
get that way."
This was my attempt to explain in brief:
(scroll down...portions of the letter have been redacted)
March 12, 2010
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attentive, you can’t help but stop occasionally and wonder at the feeling that it really
didn’t/doesn’t make sense. This was the experience relayed to me by people who
were/are aware of larger parts of the whole narrative.
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|||||||||||||||||. I’ll just take you to another point in the story that will introduce a different
perspective. I think you’ll see the facts will re-arrange themselves into something that
makes far more sense.
And to be explicit, I’ll give you examples of some of the non or un-sense within the
article that I’m alluding to:
A simple one would be this: how is it possible that in the ordinary course of things, I
could have gotten so incredibly and deeply tangled in my tax situation? ALL my taxes.
People just can’t get into that much trouble out of carelessness, even extreme
carelessness, at the ordinary pace of life and business. There had to have been some
dire, precipitating crisis.
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Another would be this: how do we swing right into the seizure of all my allowable assets
by the IRS in the second paragraph of the article? With no explanation? This just doesn’t
happen in the ordinary course of events. Again, what was the critical crisis that could
have lead to this?
Finally, I want to emphasize one of my comments on the second page of my transcription
of the article. Referring to the line ”And as a result, he wound up at the mercy of the tax
authorities.”, my comment was:
‘This is the one truly unjustifiable leap in misunderstanding: although admittedly I
practice a kind of subsistence woodworking, the conclusion that I wasn’t making enough
money to pay my taxes if circumstances had been normal is simply wrong. If I was so
broke, how did I pay off the land contract in a matter of a few years during the lull after
my bankruptcy? ‘
I think I’ve made my point, so here are the particulars:
In 1976 I contracted to remodel 339 S Ashley from a single family residence - being used
at the time as a borderline illegal rooming house - into apartments and office space for
the new owner, James V Wilton (although he is not listed in the current phonebook, he
was still in town in Oct of ‘04, in the phone book. At that time I spoke to him in relation to
the 1960 foreclosure).
It was a large, but not inappropriate, job for me given my experience and resources. At
the time I had about eight employees.
I redesigned the entire interior of the house and we proceeded with the job. My
recollection was that it moved ahead at an acceptable pace.
On January 27, 1977, the day before we were to have a scheduled framing inspection for
the reworking of the second and third (attic) floors, the boiler ran dry, the safety shut-off
did not work, and a fire started that swept up through the first floor south west room
and, spreading, took out a great deal of the second and third floors. Photographs with
commentary about it appeared the AA News and another related item on the 30th.
Literally overnight 339 S Ashley went from a large but feasible job for me to one that was
easily four or five times larger. THAT was the job I should never have touched.
Photos of the 339 and later history can be seen at:
http://supportbeal.com/339_S_Ashley/The_Burnout.html
I grossly underestimated the cost of re-building 339, and although I got at least two
thirds of the way to completion, I could not finish it. The one phrase explanation for why I
even attempted it ought to be ‘overly optimistic, un-tempered egotism.’
As the job proceeded, I worked more and more side jobs to raise money to carry it
forward. But this only aggravated the situation; it slowed progress on 339. I made a
fundamental mistake in not informing Wilton how much I had underbid the job as soon as
I began to see the problem for myself. Instead, I persevered till I simply could not raise
any more money. I still had draws left in 339, but I would not take them until the
appropriate project milestone was met. In the end, the job collapsed because I couldn’t
pay the subcontractors on time. That is the death blow to any construction project.
Wilton adamantly refused to re-negotiate the contract and I let myself be put in a position
where it became a legal matter that I had abandoned the job. I simply couldn’t carry
forward without renegotiating the dollar amount for the contract or, at least, making
some radical accommodation to my need to extend the completion timeline. Eventually,
Wilton hired Perkins Construction to complete the job and subsequently sued me for
difference ($60,000 +/-) between my contract and the final cost.
For myself, I was sued by all the subs I couldn’t pay promptly, had to lay off all but one of
my employees, and retrench to the point where I knew I could complete - on my own - the
jobs I had in progress.
Personally, I made no money whatsoever on 339 S Ashley although Wilton even now
thinks I left the job with many thousands of dollars of valuable equipment bought with
advances on the job. This was hardly the case. A few hundred dollars and all purchased
primarily to forward the 339 job. Most of the equipment melted away since, to settle as
best I could with some of my employees, I simply opened up to them everything I owned,
telling them to take whatever they wanted to the point where they felt they had a fair
reckoning of what I still owed them.
The subcontractors, to my recollection, eventually all got paid in full.
Here, though, is the key: at virtually the same time the job collapsed, I was due to make
the IRS quarterly deposit of employee withholdings. My recollection is that it was
something around $7000. When I was unable to pay it – I had been planning on using my
next draw to do so - that default immediately began to generate penalties and interest. I
can’t tell you anymore the exact numbers for the penalty and interest but you can verify
for yourself that they can balloon at an astonishing pace.
I was never able to get control of it because it was growing at a geometric rate. Much of
the real problem was my own inexperience and lack of a mentor. I didn’t understand how
to bargain with the IRS; I would ask them what I owed, they would name a figure, I’d say
there was no way I could come up with it and they would essentially say, do so or else. To
me, there wasn’t anything to do with that except walk away and hope for a miracle.
My priorities in handling my payables after the collapse were this: first, I paid my
employees, then I paid my subcontractors, then I saved my home which eventually
required that I file for bankruptcy. This took several years, the bankruptcy filing in ‘86.
For some, including myself, things still may not be satisfactorily settled, though it is to a
stage where I am no longer being actively pursued.
In the background were repeated raids by the State on my bank accounts since I owed
them too for withholdings, though their penalties etc were nothing compared to the IRS.
The State was also eventually paid in full. The IRS, meanwhile, was oddly quiescent,
simply sending me quarterly notices of what I owed and requests for payment. During
the bankruptcy they had agreed to the proposed bankruptcy re-payment plan on the
assumption that I would eventually, somehow, pay the entire amount they maintained I
owed. As a practical matter, this wasn’t going to be possible.
With growing IRS liens in excess of $150K and no prospect of being able to pay them, my
ability to obtain normal financing for anything became impossible. I had to pay for
everything as I went along. That is how I have had to live for the last twenty, thirty odd
years. I have not been a paragon; being so financially crippled meant that I was often late
and hampered in paying my bills and carrying forward my work and fulfilling business
commitments. I was lucky that many people who were close to the facts of the matter
allowed me great leeway in settling up. Some simply forgave my obligations. It has only
been in the wake of Doug Gale’s insistence in foreclosing on 1960 that I have, again,
generated a backlog of unpaid bills.
I’ve described this predicament before as being a debt driven game of whack-a-mole
where I would get things under control in one arena, but then they would pop out of
control in another. The process was actually more subtle. Although I made few payments
to the IRS directly, the overarching obligation to them meant that I had to actually work
for every penny I used to settle the 339 debts. At the time I had no real following I could
borrow from and the IRS presence made it impossible to borrow commercially. So I did
have to play whack-a-mole for several years among the 339 debts as I cleared them –
one debt would be satisfied only to have another pending one flare up.
Less obvious, and I now explicitly understand the process, was the fact that my debt
burden was slowly evolving, migrating, into areas where it could be most easily
managed. Most people’s common experience of this is deciding to pay for groceries
before you make the car payment and so on: the most critical purchases and payments
get made first and the ones that are the most flexibly forgiving – for whatever reasons,
and there are many – get paid last. That’s how credit card debt balloons. For me, it meant
that my taxes - personal IRS and property - did not get paid until they became critical. It
turned out that putting off paying property taxes was the easiest to implement and
cheapest place to temporarily park debt. As long as I got around to paying them before
the tax sale, something I sometimes failed to accomplish.
* * *
In ’96, faced with the tolling of their 339 generated liens, the IRS seized all my assets in
an attempt to collect. I won’t go into the details but the best upshot of it was that they
finally ruled me uncollectable. When they found no concealed assets and - as my
attorney at the time pointed out - when I had to borrow the money ($11,000) from clients
to redeem my equipment, that finally convinced them I indeed was insolvent.
It was during this episode that the sale of 1960 to Martin Boisture, and the rescinding by
the IRS, occurred. My daughter was 2 years old at the time.
The agreement then reached with the IRS - it was strictly verbal - was if I didn’t go
underground, filed and paid my ordinary taxes, I would not be subject to further
collection action. Their liens couldn’t be lifted but I could plan on them tolling in 2002
and then, perhaps, my life could return to something more normal. This is why Doug Gale’
s argument that I would have lost 1960 to the IRS anyway if he hadn’t taken it becomes
the self-serving justification and ‘misrepresentation’ that it was and is.
I want to close this letter here, it’s long enough already, but I need to put out two more
factors that made me especially vulnerable when Destiny-98 finally closed in.
One was the fact that in early 2002 I again began to get requests for payment on the 339
liens from the IRS. These requests were not addressing my then current personal tax
liabilities. I do not think it would be possible at this stage to reconstruct why this
happened. I know that I’m not sure myself. I have explained to others that I believe there
was a change in personnel and policy at the IRS that resulted in someone unaware of the
arrangements made in 1996 deciding that some attempt should be made to collect on the
liens. It was a return to an irresolvable situation. As part of this process, the liens were
refreshed (the proper term eludes me) and I was faced with having to live with them for
another 10 years before they would toll and life could possibly be somewhat normal.
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What has happened to 1960 in the mean time has been the playing out of one of the
likely scenarios I had predicted.
Destiny-98/REO America/Rebuild America/Doug Gale after failing to sell it on the open
market and trying to extort from me a buy-back price far more than it’s conceivable
value, finally sold it to a local buyer at something close to what it is worth. Gale didn’t
offer to let me counter.
The house is empty and appearances indicate that it will remain so. The chicken house
has been burned, all the landscaping about the house cut down and the studio/shop
turned into vehicle storage. It has become the kind of junk property tax lien buyers make
of people’s homes.
I have not given up all hope of getting it back…after all Harry Truman managed to get
back his family home for his mother. Maybe I can do it for Anna.
The problem will be in convincing the current owner and the people who are controlling
it that their interests might be better served by doing the right thing. Something that
might pay them more handsome dividends than they’ll get out of holding onto a marginal
property that they really cannot use to anything like it’s full potential.
P. Beal
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attentive, you can’t help but stop occasionally and wonder at the feeling that it really
didn’t/doesn’t make sense. This was the experience relayed to me by people who
were/are aware of larger parts of the whole narrative.
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|||||||||||||||||. I’ll just take you to another point in the story that will introduce a different
perspective. I think you’ll see the facts will re-arrange themselves into something that
makes far more sense.
And to be explicit, I’ll give you examples of some of the non or un-sense within the
article that I’m alluding to:
A simple one would be this: how is it possible that in the ordinary course of things, I
could have gotten so incredibly and deeply tangled in my tax situation? ALL my taxes.
People just can’t get into that much trouble out of carelessness, even extreme
carelessness, at the ordinary pace of life and business. There had to have been some
dire, precipitating crisis.
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Another would be this: how do we swing right into the seizure of all my allowable assets
by the IRS in the second paragraph of the article? With no explanation? This just doesn’t
happen in the ordinary course of events. Again, what was the critical crisis that could
have lead to this?
Finally, I want to emphasize one of my comments on the second page of my transcription
of the article. Referring to the line ”And as a result, he wound up at the mercy of the tax
authorities.”, my comment was:
‘This is the one truly unjustifiable leap in misunderstanding: although admittedly I
practice a kind of subsistence woodworking, the conclusion that I wasn’t making enough
money to pay my taxes if circumstances had been normal is simply wrong. If I was so
broke, how did I pay off the land contract in a matter of a few years during the lull after
my bankruptcy? ‘
I think I’ve made my point, so here are the particulars:
In 1976 I contracted to remodel 339 S Ashley from a single family residence - being used
at the time as a borderline illegal rooming house - into apartments and office space for
the new owner, James V Wilton (although he is not listed in the current phonebook, he
was still in town in Oct of ‘04, in the phone book. At that time I spoke to him in relation to
the 1960 foreclosure).
It was a large, but not inappropriate, job for me given my experience and resources. At
the time I had about eight employees.
I redesigned the entire interior of the house and we proceeded with the job. My
recollection was that it moved ahead at an acceptable pace.
On January 27, 1977, the day before we were to have a scheduled framing inspection for
the reworking of the second and third (attic) floors, the boiler ran dry, the safety shut-off
did not work, and a fire started that swept up through the first floor south west room
and, spreading, took out a great deal of the second and third floors. Photographs with
commentary about it appeared the AA News and another related item on the 30th.
Literally overnight 339 S Ashley went from a large but feasible job for me to one that was
easily four or five times larger. THAT was the job I should never have touched.
Photos of the 339 and later history can be seen at:
http://supportbeal.com/339_S_Ashley/The_Burnout.html
I grossly underestimated the cost of re-building 339, and although I got at least two
thirds of the way to completion, I could not finish it. The one phrase explanation for why I
even attempted it ought to be ‘overly optimistic, un-tempered egotism.’
As the job proceeded, I worked more and more side jobs to raise money to carry it
forward. But this only aggravated the situation; it slowed progress on 339. I made a
fundamental mistake in not informing Wilton how much I had underbid the job as soon as
I began to see the problem for myself. Instead, I persevered till I simply could not raise
any more money. I still had draws left in 339, but I would not take them until the
appropriate project milestone was met. In the end, the job collapsed because I couldn’t
pay the subcontractors on time. That is the death blow to any construction project.
Wilton adamantly refused to re-negotiate the contract and I let myself be put in a position
where it became a legal matter that I had abandoned the job. I simply couldn’t carry
forward without renegotiating the dollar amount for the contract or, at least, making
some radical accommodation to my need to extend the completion timeline. Eventually,
Wilton hired Perkins Construction to complete the job and subsequently sued me for
difference ($60,000 +/-) between my contract and the final cost.
For myself, I was sued by all the subs I couldn’t pay promptly, had to lay off all but one of
my employees, and retrench to the point where I knew I could complete - on my own - the
jobs I had in progress.
Personally, I made no money whatsoever on 339 S Ashley although Wilton even now
thinks I left the job with many thousands of dollars of valuable equipment bought with
advances on the job. This was hardly the case. A few hundred dollars and all purchased
primarily to forward the 339 job. Most of the equipment melted away since, to settle as
best I could with some of my employees, I simply opened up to them everything I owned,
telling them to take whatever they wanted to the point where they felt they had a fair
reckoning of what I still owed them.
The subcontractors, to my recollection, eventually all got paid in full.
Here, though, is the key: at virtually the same time the job collapsed, I was due to make
the IRS quarterly deposit of employee withholdings. My recollection is that it was
something around $7000. When I was unable to pay it – I had been planning on using my
next draw to do so - that default immediately began to generate penalties and interest. I
can’t tell you anymore the exact numbers for the penalty and interest but you can verify
for yourself that they can balloon at an astonishing pace.
I was never able to get control of it because it was growing at a geometric rate. Much of
the real problem was my own inexperience and lack of a mentor. I didn’t understand how
to bargain with the IRS; I would ask them what I owed, they would name a figure, I’d say
there was no way I could come up with it and they would essentially say, do so or else. To
me, there wasn’t anything to do with that except walk away and hope for a miracle.
My priorities in handling my payables after the collapse were this: first, I paid my
employees, then I paid my subcontractors, then I saved my home which eventually
required that I file for bankruptcy. This took several years, the bankruptcy filing in ‘86.
For some, including myself, things still may not be satisfactorily settled, though it is to a
stage where I am no longer being actively pursued.
In the background were repeated raids by the State on my bank accounts since I owed
them too for withholdings, though their penalties etc were nothing compared to the IRS.
The State was also eventually paid in full. The IRS, meanwhile, was oddly quiescent,
simply sending me quarterly notices of what I owed and requests for payment. During
the bankruptcy they had agreed to the proposed bankruptcy re-payment plan on the
assumption that I would eventually, somehow, pay the entire amount they maintained I
owed. As a practical matter, this wasn’t going to be possible.
With growing IRS liens in excess of $150K and no prospect of being able to pay them, my
ability to obtain normal financing for anything became impossible. I had to pay for
everything as I went along. That is how I have had to live for the last twenty, thirty odd
years. I have not been a paragon; being so financially crippled meant that I was often late
and hampered in paying my bills and carrying forward my work and fulfilling business
commitments. I was lucky that many people who were close to the facts of the matter
allowed me great leeway in settling up. Some simply forgave my obligations. It has only
been in the wake of Doug Gale’s insistence in foreclosing on 1960 that I have, again,
generated a backlog of unpaid bills.
I’ve described this predicament before as being a debt driven game of whack-a-mole
where I would get things under control in one arena, but then they would pop out of
control in another. The process was actually more subtle. Although I made few payments
to the IRS directly, the overarching obligation to them meant that I had to actually work
for every penny I used to settle the 339 debts. At the time I had no real following I could
borrow from and the IRS presence made it impossible to borrow commercially. So I did
have to play whack-a-mole for several years among the 339 debts as I cleared them –
one debt would be satisfied only to have another pending one flare up.
Less obvious, and I now explicitly understand the process, was the fact that my debt
burden was slowly evolving, migrating, into areas where it could be most easily
managed. Most people’s common experience of this is deciding to pay for groceries
before you make the car payment and so on: the most critical purchases and payments
get made first and the ones that are the most flexibly forgiving – for whatever reasons,
and there are many – get paid last. That’s how credit card debt balloons. For me, it meant
that my taxes - personal IRS and property - did not get paid until they became critical. It
turned out that putting off paying property taxes was the easiest to implement and
cheapest place to temporarily park debt. As long as I got around to paying them before
the tax sale, something I sometimes failed to accomplish.
* * *
In ’96, faced with the tolling of their 339 generated liens, the IRS seized all my assets in
an attempt to collect. I won’t go into the details but the best upshot of it was that they
finally ruled me uncollectable. When they found no concealed assets and - as my
attorney at the time pointed out - when I had to borrow the money ($11,000) from clients
to redeem my equipment, that finally convinced them I indeed was insolvent.
It was during this episode that the sale of 1960 to Martin Boisture, and the rescinding by
the IRS, occurred. My daughter was 2 years old at the time.
The agreement then reached with the IRS - it was strictly verbal - was if I didn’t go
underground, filed and paid my ordinary taxes, I would not be subject to further
collection action. Their liens couldn’t be lifted but I could plan on them tolling in 2002
and then, perhaps, my life could return to something more normal. This is why Doug Gale’
s argument that I would have lost 1960 to the IRS anyway if he hadn’t taken it becomes
the self-serving justification and ‘misrepresentation’ that it was and is.
I want to close this letter here, it’s long enough already, but I need to put out two more
factors that made me especially vulnerable when Destiny-98 finally closed in.
One was the fact that in early 2002 I again began to get requests for payment on the 339
liens from the IRS. These requests were not addressing my then current personal tax
liabilities. I do not think it would be possible at this stage to reconstruct why this
happened. I know that I’m not sure myself. I have explained to others that I believe there
was a change in personnel and policy at the IRS that resulted in someone unaware of the
arrangements made in 1996 deciding that some attempt should be made to collect on the
liens. It was a return to an irresolvable situation. As part of this process, the liens were
refreshed (the proper term eludes me) and I was faced with having to live with them for
another 10 years before they would toll and life could possibly be somewhat normal.
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* * *
What has happened to 1960 in the mean time has been the playing out of one of the
likely scenarios I had predicted.
Destiny-98/REO America/Rebuild America/Doug Gale after failing to sell it on the open
market and trying to extort from me a buy-back price far more than it’s conceivable
value, finally sold it to a local buyer at something close to what it is worth. Gale didn’t
offer to let me counter.
The house is empty and appearances indicate that it will remain so. The chicken house
has been burned, all the landscaping about the house cut down and the studio/shop
turned into vehicle storage. It has become the kind of junk property tax lien buyers make
of people’s homes.
I have not given up all hope of getting it back…after all Harry Truman managed to get
back his family home for his mother. Maybe I can do it for Anna.
The problem will be in convincing the current owner and the people who are controlling
it that their interests might be better served by doing the right thing. Something that
might pay them more handsome dividends than they’ll get out of holding onto a marginal
property that they really cannot use to anything like it’s full potential.
P. Beal
Flickr site of photographs of
1960 S Maple by John Baird:
http://www.flickr.com/photos/jo
hnbaird/491830437/
http://www.flickr.com/photos/jo
hnbaird/494269401/
1960 S Maple by John Baird:
http://www.flickr.com/photos/jo
hnbaird/491830437/
http://www.flickr.com/photos/jo
hnbaird/494269401/
