The Tax Court held on Monday that New York lawyer Thomas F. Liotti had $11,974.65 of discharge of indebtedness income when MBNA accepted $5,200 to settle his $17,174.65 credit card balance. Liotti v. Commissioner, T.C. Summ. Op. 2011-73 (June 20, 2011):
Petitioner contends that he did not have DOI income on the basis that: (1) The amount he owed MBNA was in dispute (a contested liability); (2) the amount of interest MBNA was charging him was usurious; and (3) he did not receive a Form 1099-C from MBNA and did not know that there would be any tax ramifications for settling his account for less than the full amount of his MBNA account balance.
Petitioner’s contention that the debt is contested is incorrect. Petitioner has made no argument against the original amount of his debt. … Petitioner’s challenge to the amount of interest he is charged does not rise to a contested liability. …
Coupled with, and seemingly a second prong of, petitioner’s contested liability argument is his argument that the interest MBNA charged was usurious under New York law and the discharge of such interest should, therefore, not be income to him. … Petitioner has taken on the mantle of protecting all consumers from the aggressive tactics of the credit card companies and even informed the Court that he was “here, Judge, for the American people, as well as for myself.” … All of the credit card statements that petitioner entered into evidence reflect an annual interest rate of 22.98%. While this interest rate is high, it does not reach the level of what petitioner claims is usurious in New York.
Petitioner also argues that he never received a Form 1099-C from MBNA and did not know that there would be any tax ramifications for settling his debt for less than the full amount. … Petitioner is an attorney and a member of the Tax Court bar with legal acumen and a fundamental knowledge of legal research. The fact that petitioner did not know that there were tax ramifications associated with settling a debt for less than its face value does not negate his enjoyment of the economic benefit from the discharge of his debt.
Mr. Liotti is the author of Judge Mojo: The True Story of One Attorney’s Fight Against Judicial Terrorism (2008):
Chilling and gripping, Judge Mojo tells the incredible true story of a mentally unstable judge who became obsessed with destroying Thomas F. Liotti, a high-profile criminal defense attorney.
Liotti relates how Judge B. Marc Mogil suffered from bipolar disorder but refused to take his medication and started referring to himself as Judge Mojo. What began as a simple dispute between the two men soon turned into a full-fledged obsession on the part of Judge Mogil. He threatened Liotti’s life and that of his family, stalking him over the Internet and through bar associations until Liotti’s life resembled a walking nightmare.
As Judge Mogil’s illness remained untreated, his outrageous claims of being a concert pianist and of the ability to fly F-14 fighter jets continued. But it wasn’t until he was removed from the bench and disbarred that the damage of his rule became apparent. Liotti objectively shows how the judicial system failed to remove Mogil from his position in the midst of several allegations against him, creating misery for attorneys and clients and pessimism for the system itself.
Through an intriguing mix of legal history, personal insight, and hard facts, Liotti chronicles his bizarre saga and speaks to the abusive power of one judge’s corruption.
