Friday, April 5, 2013

My Father's Kerfuffle With the IRS

Every now and then, I get on a roll with my old man's stories, and the IRS' sortie against him was a good one.

He owned a sawmill in the Sierras, not far from Truckee, which he'd bought for nothing down from some estate in Chicago who'd abandoned the facility and was thrilled to find any taker. Though the equipment was old, he managed to make it work. In the late 1960s, the federal government was buying all the lumber it could and shipping it off to Vietnam.

A small annoyance, though, was the number of ranchers and locals who would come to the mill to buy lumber. Selling to jobbers and wholesalers by the railcar load was one thing, but a few boards and two-by-fours in the back of a guy's pickup was a nuisance. Still, he did it to stay in good graces.

But they had to pay cash, and over the years, several thousand dollars had built up. He split the proceeds with the mill GM and the bookkeeper.

How the IRS found out I do not know. One of my father's business aphorisms was, "Don't bullshit the banker and don't fire the bookkeeper," so a violation of the latter was suspect. But the bookkeeper was my cousin, hadn't been fired and also got his cut.

In any event, my father was suspected of concealing income, and a huge audit commenced. 

The more the IRS got into things, the more rabid it became. In the IRS' defense, my father was never one to shy away from claiming a business expense. In 1959, he took a first class trip to Europe on the Queen Mary and wrote the whole thing off. I've no doubt that much of our house was actually part of the company's fixed asset account.

In any event, the IRS agent leading the charge thought he'd found a gold mine. I remember my mother crying, saying how the company would have to be shut down, leaving my father to hit the employment lines when he was  little past sixty.

Meanwhile, my father had taken his stash--now converted to a bunch of hundred dollar bills, and hid it in the freezer.

About that time, his childhood friend from Lakeview, OR, was coming to visit. My father hadn't seen Willard in many years, since their early years when both their families were dirt poor in the first two decades of the twentieth century.

Meanwhile, the freezer broke, and the water saturated the boodle of hundred dollar bills. They were dutifully unwrapped and placed on the kitchen table to dry. About the time Willard came through the front door, someone flipped on the swamp cooler in the window by the table. As Willard came into the kitchen, hundred dollar bills were floating all over the place.'"Kenneth, you seem to have done very well," Willard said.

And so the IRS audit ultimately went. It thought it had a case, but in the end, nearly two years later, after examining thousands of transactions and conducting a dozen or more interviews, the Service concluded that it couldn't prove it's case.

The investigating agent's parting shot was something to the effect of, "We know damn well you did something, but we can't prove it. This time."

I never did learn how my father explained the floating C-notes to Willard. He probably said, "How the hell do you explain something like that?"

Which, I guess, was what he'd been telling the IRS all along. It had to have been something like that.

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