A California businessman was sentenced to a five-year jail term for tax evasion and ordered to pay a $75,000 fine, as well as given a tongue lashing by the judge, after he failed to report the profits from his marble tile company on his personal income tax return, claiming the business was owned by a “pure trust.”

U.S. District Judge A. Howard Matz sentenced Giancarlo Pertile, the former owner of Art Marble Design Inc., in Moorpark, Calif., to prison on Thursday after Pertile was convicted in January by a Los Angeles federal jury of five counts of tax evasion for the years 1998 through 2002.

Pertile allegedly concealed business receipts from his bookkeeper and accountant, causing fraudulent corporate income tax returns to be filed with the IRS that falsely understated his business’ income for the years at issue, as well as individual income tax returns that falsely understated his taxable income. 

According to prosecutors, Pertile paid only $1,200 in federal income tax from 1998 to 2002 despite earning over $850,000 from the operation of Art Marble Design during the same time period. Instead of reporting the profits from the business on his tax returns, Pertile deposited a substantial portion of the business income into additional bank accounts that he concealed from his bookkeeper, accountant and the IRS. As a result, he allegedly evaded the payment of approximately $247,000 in federal income tax between 1998 and 2002.

At trial, Pertile unsuccessfully argued that his company’s business receipts were not taxable because the company was owned by a “pure trust.” Pertile also placed his home in the name of a ministry to conceal his ownership in the property from the IRS. At the sentencing hearing, Judge Matz noted that after Pertile was indicted on tax charges, he continued with the same arguments that led to his indictment.

Matz also pointed out that Pertile attempted to obstruct his criminal prosecution by filing documents denying that the court possessed jurisdiction over him. The judge stated that Pertile’s arguments made no sense and were designed solely to obstruct the proceedings. In making this assessment, Matz noted that the Pertile is a man of "supreme intelligence" who has two PhDs and who clearly knew better. The judge stated that Pertile's "arrogant conduct knows no limits."

At the sentencing hearing, Matz said he believed that Pertile showed no contrition or remorse. The judge stated that Pertile was "hypocritical" in accepting Social Security benefits and applying to become a U.S. citizen while refusing to admit to his failure to pay his personal taxes.

“Mr. Pertile chose to subscribe to a frivolous tax argument and lost,” said Eileen Mayer, chief of the IRS’s Criminal Investigation Division, in a statement. “While taxpayers have the right to contest their tax liabilities in the courts, taxpayers do not have the right to violate and disobey tax laws. As in the case against Mr. Pertile, and others similarly situated, the courts have consistently held that there are no legal grounds for the failure to file tax returns or the failure to pay one's tax liability.”

Separately, the Treasury Inspector General for Tax Administration released a report Monday on its latest audit of the IRS’s compliance with legal guidelines in the IRS Restructuring and Reform Act of 1998 that prohibit the IRS from using the term “illegal tax protester” and similar designations to refer to taxpayers. TIGTA noted, however, that IRS employees continue to refer to taxpayers by these designations in their case narratives, even though using “illegal tax protester” or similar designations may stigmatize taxpayers and cause employee bias in future contacts with them.

TIGTA found that the IRS has not reintroduced past illegal tax protester codes or similar designations on taxpayer accounts in fiscal year 2009, and IRS publications and the Internal Revenue Manual no longer contain any illegal tax protester references. However, TIGTA found that out of approximately 65.3 million records and cases, there were 324 instances in which 263 employees had referred to taxpayers as “tax protester,” “illegal tax protester,” “constitutionally challenged,” or other similar designations in the case narratives on the computer systems analyzed.

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