1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 AUGUST 25, 2015 10 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARING 11 APPEAL OF 12 ROBERT H. LOWE and SHERYL L. BERKOFF 13 NO. 571973 14 AGAINST PROPOSED ASSESSMENT OF 15 ADDITIONAL INCOME TAX 16 17 18 19 20 21 22 23 24 25 26 Reported by: Kathleen Skidgel 27 CSR No. 9039 28 1 1 P R E S E N T 2 For the Board Jerome E. Horton of Equalization: Chairman 3 Sen. George Runner (Ret.) 4 Vice Chair 5 Fiona Ma, CPA Member 6 Diane L. Harkey 7 Member 8 Yvette Stowers Appearing for Betty T. 9 Yee, State Controller (per Government Code 10 Section 7.9) 11 Joann Richmond Chief 12 Board Proceedings Division 13 For Board of 14 Equalization Staff: Lou Ambrose Tax Counsel IV 15 Legal Department 16 For Franchise Tax Board: Sonia Woodruff 17 Tax Counsel 18 Ron Hofsdal Tax Counsel 19 Craig Scott 20 Assistant Chief Counsel Tax Administration Bureau 21 For Appellants: Mark Bernsley 22 Attorney 23 Robert H. Lowe Taxpayer 24 Sheryl Berkoff-Lowe 25 Taxpayer 26 Carl Williams Witness 27 28 ---oOo--- 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 AUGUST 25, 2015 4 ---oOo--- 5 MR. HORTON: Members -- Members, let us 6 reconvene the meeting of the Board of Equalization. 7 We are back in session. 8 Members, after consideration, I've asked 9 Appeals to consider the additional information 10 provided to this body as well as the Franchise Tax 11 Board. And I believe we should at least go on 12 record as to what their position is. And then we 13 will entertain. 14 So I'm going to ask that Ms. Richmond 15 please introduce the case. Then we'll go to Appeals 16 and ask them to provide us with their insight on the 17 information and ask all the parties to come forward 18 if they will. 19 MS. RICHMOND: Our first item on this 20 morning's agenda is Item B, the Corporate Franchise 21 and Personal Income Tax Appeals Hearings. 22 Our first hearing is B1, Robert H. Lowe and 23 Sheryl L. Berkoff. 24 MR. AMBROSE: And -- 25 MR. HORTON: Please present the issues in 26 this case and your thoughts as relative to the 27 additional documentation. 28 MR. AMBROSE: Good morning, Chairman 3 1 Horton, Members of the Board. 2 The issues in this case are whether 3 Appellants have shown that Franchise Tax Board erred 4 in its determination of the basis of real property 5 sold by Appellants and the resulting taxable gain. 6 And the second issue is whether Appellants 7 have established reasonable cause for the abatement 8 of the penalty for the failure to furnish -- for the 9 failure to furnish information. 10 Mr. Chairman, the Franchise Tax Board has 11 requested permission to speak first as to their 12 thoughts about a possible postponement, with your 13 permission. 14 MR. HORTON: In -- in the essence of a 15 potential -- let me -- let me share to the -- to the 16 Franchise Tax Board -- a potential resolution of 17 this case, we would -- we would grant you the 18 opportunity to share your thoughts in that regard. 19 MS. WOODRUFF: Okay. Thank you, Chairman 20 Horton and Members of the Board. 21 My name is Sonia Woodruff, and with me 22 today are Ron Hofsdal and Craig Scott, also from the 23 Franchise Tax Board. 24 I just would like to note that a 25 substantial amount of new information and evidence 26 has been provided to us today for the first time. 27 And most notably Mr. Williams' database was provided 28 to us for the first time today. 4 1 I want to point out that we've been 2 requesting this very information for over two years. 3 We asked for it in advance of the first pre-hearing 4 conference. We asked for it again before the 5 last -- before the deposition of the expert 6 witnesses, and we haven't received it. 7 This is the first time it's being provided 8 today. I'm glad that it's being provided today and 9 I would really like the opportunity to review it and 10 digest the information in that. 11 You know -- and I'd also like to point out 12 that this information may support Mr. Williams' 13 report. It may serve to validate items in his 14 report. And I'd like to -- the chance to review 15 that information and come up with a meaningful 16 response. 17 MR. HORTON: Okay. In light of the -- that 18 the information may be determinative in the final 19 decision between the parties, the Board will grant 20 unless there's an objection of the Members. Not a 21 postponement until the next hearing. We want to 22 resolve this matter. 23 I mean this is a very fact-intensive case, 24 lots of documents, lots of briefings and so forth. 25 And knowing the Members as I know them, they have 26 read everything and they have gone through this 27 deliberatively, meticulously and so forth. 28 And so, given the new evidence -- I haven't 5 1 had an opportunity to review the new evidence 2 either. So in the essence of fairness to all 3 parties, we will continue this case until next -- 4 the next hearing. 5 What date is that, Ms. Richmond? 6 MS. RICHMOND: November 17th through the 7 19th. 8 MR. HORTON: November 17th. 9 Mr. Ferris, any thoughts? 10 MR. FERRIS: No. 11 MR. HORTON: Only because I saw you 12 standing up there, I figured -- 13 MR. FERRIS: I was just standing there in 14 case you needed me. 15 MR. HORTON: Oh, in case -- the wall has 16 fallen. You can go back. 17 MR. BERNSLEY: May I be heard? 18 MR. HORTON: Yes. 19 MR. BERNSLEY: The new evidence was all 20 materials requested by the Board. And at no time 21 were we advised of any deadline or any condition for 22 the proceeding moving forward. And had we known 23 that, we would have been able to address a lot of 24 these concerns. 25 Mr. Lowe took off from work today -- and I 26 think you understand what he does and what his 27 schedule is -- essentially shutting down a piece of 28 an industry so that he could be here today and 6 1 proceed with this hearing. And it's incredibly 2 inconvenient and a surprise that complying with the 3 request of the Board denies my client the 4 opportunity to get what has been going on for four 5 years finished. 6 MR. HORTON: I -- I -- I appreciate your 7 testimony. 8 I don't believe the compliance is the 9 issue. I think the point in time in which the 10 compliance occurred. We're -- and certainly 11 appreciate the work and effort that the taxpayer has 12 put into this, as well as everyone else, you know, 13 that this delay will affect and how it, you know, 14 causes dismay for all of us. 15 But, in the essence of fairness and trying 16 to resolve this issue, I believe the request is 17 reasonable. 18 Member Harkey. 19 MS. HARKEY: It could be that you won't 20 need to come back. 21 MR. LOWE: That would be the hope. 22 MS. HARKEY: That would be -- that would 23 probably be the hope. 24 There's a lot of data that's submitted. 25 Some of it I have seen before. But from Exhibit 8 26 on to the back, is relatively new to all of us. 27 FTB's got a new chart that they submitted, 28 that they may want to review. There's -- there's 7 1 just -- this has got tons of data. We've seen 2 appraisals, we've reviewed appraisals. I've bounced 3 back and forth between appraisals to figure out 4 who's supporting what, what's supporting what. 5 We've put a lot of work into this. 6 And so there's a potential, I guess, as the 7 Chairman's saying, it could work to your favor or 8 not. And I -- 9 MR. LOWE: Could -- could I speak for one 10 second? 11 MR. HORTON: Sure. 12 MR. LOWE: I -- I just wanted to say, first 13 of all, thank you for -- for letting us come before 14 you. 15 You know, I take this very seriously. I 16 think that this new evidence, which was asked for by 17 the Board, which we went out and provided for you, I 18 think speaks to the level at which we take this 19 seriously. 20 I've been paying my taxes in this state 21 since I was 15 years old. I pay it on time. I paid 22 everything that was required of me. And it's -- 23 it's -- I truly believe that it is -- it's a 24 privilege because living in California is the dream. 25 California gave me everything. 26 So I guess what I would ask for you is, is 27 just common sense, fairness and -- and also some 28 expediting if we could do it because it's been 8 1 years. 2 So, thank you. 3 MR. HORTON: Thank you very much. The 4 testimony is much appreciated. We look forward 5 to -- we take the request for expediting this 6 seriously. 7 MR. BERNSLEY: Yes. 8 MR. HORTON: The material that is before 9 us, although I believe it's important to the 10 determination of the case, I believe that the 11 information can be reviewed expeditiously and should 12 be. 13 This will be the last continuance 14 regardless. We would encourage all parties to 15 provide whatever information well before the day of 16 the hearing. 17 With that, thank you so very much. We 18 appreciate your time, and apologies to -- to not 19 only the Lowes as well as their representatives, to 20 Appeals, and everyone else who has prepared. 21 Hopefully your preparation will not be in vain. 22 MR. LOWE: Thank you. 23 MR. BERNSLEY: Thank you. 24 ---oOo--- 25 26 27 28 9 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on August 25, 2015 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 9 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: September 11, 2015 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 10