Florida has been a retirement destination for decades and, unsurprisingly, has one of the largest population bases over the age of 65 in the United States. Unfortunately, elderly individuals can be viewed as easy targets to scammers of all types. When scams involve an individual’s retirement accounts, unforeseen tax consequences may occur.
In Gomas v. United States, the U.S. District Court for the Middle District of Florida held that distributions from retirement accounts made to a scammer must be included in the victim’s gross income. 132 A.F.T.R.2d 2023-5165 (M.D. Fla. July 17, 2023). The victims were Dennis and Suzanne Gomas, an elderly married couple who retired in Florida in 2016. Mrs. Gomas’ daughter, Suzanne Anderson, perpetuated an extensive and complex fraud scheme that left the Gomas’ nearly destitute.
While the opinion provides significantly more detail, in short, Ms. Anderson conned Mr. Gomas into believing that he was facing arrest due to former employees using Mr. Gomas’ birthdate and social security number to defraud the customers of an online raw pet food business formerly run by Mr. Gomas. Ms. Anderson suggested that the couple hire an attorney, who conveniently required a $125,000 retainer. She created a fake email and posed as the lawyer in correspondence with the couple. After nearly two years, Ms. Anderson had stolen nearly $2 million from her mother and stepfather. Fortunately, Ms. Anderson’s crimes caught up with her, and she was sentenced to 25 years in prison.
Mr. and Mrs. Gomas sought to deduct the distributions made in furtherance of Ms. Anderson’s scheme. The IRS was unwilling, or at least argued they lacked the authority to exercise discretion and excuse the payment of taxes on the stolen funds. Accordingly, the IRS denied the deduction and litigation ensued. Although historically the couple would be able to deduct the theft loss in the year the theft was discovered, Congress suspended this deduction for 2018 through 2025 tax years. 26 U.S.C. §165(h)(5). The Gomas’ additional arguments were unpersuasive, and the Court concluded, “It is highly unlikely that Congress, when it eliminated the theft loss deduction beginning in 2018, envisioned injustices like the case before the Court. Be that as it may, the law is clear and it favors the IRS. . . . The Court is bound to follow the law, even where, as here, the outcome seems unjust.” Gomas, 132 A.F.T.R.2d at 2023-5169.
As elder abuse crimes continue to rise, we must be aware of potential unintended consequences facing the victims.
© 2024 This article was originally published on Feb. 1, 2024, in The SideBar, the newsletter of the Martin County Bar Association.
The information provided in this article does not, and is not intended to, constitute legal advice; it is for general informational purposes only. No reader of this article should act or refrain from acting on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction to ensure the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. For additional information or questions, we urge you to contact the author of this article or a representative of Jones Foster here.
Matthew Worsham is a member of Jones Foster's Trust & Estate Litigation and Private Wealth, Wills, Trusts & Estates teams and focuses his practice in the areas of probate, guardianship, and trust litigation and trust and estate administration. He represents individual beneficiaries, heirs, fiduciaries, and corporate fiduciaries in probate, guardianship, and trust-related matters, including will and trust contests, trustee/personal representative removal actions, accounting actions, will and trust reformation and modification matters, and elective share cases. Matthew's previous experience includes commercial and employment litigation matters.
Matthew is actively involved in several legal organizations, including as chair of the Martin County Bar Association's Wills, Trusts & Estates/Probate Committee, and The Florida Bar’s RPPTL Section and Trial Lawyers Section. He holds a Master of Laws degree in Estate Planning from the University of Miami School of Law.
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