FOLLOW US

A New York federal judge has ruled that a woman cleared of responsibility for her husband’s construction company’s $1.7 million tax debts cannot recoup her nearly $95,000 in legal costs, despite a jury siding with her.

U.S. Magistrate Judge James M. Wicks held Friday that the government was justified in pursuing Martha Gonzalez, who had been accused of failing to pay Camabo Industries Inc.’s employment taxes. While a jury acquitted her of responsibility in May, the judge determined that the IRS’ position was “substantially justified,” blocking Gonzalez from recovering costs under Section 7430 of the Internal Revenue Code.

Why the Government Targeted Gonzalez

Judge Wicks pointed to Gonzalez’s own testimony and corporate role as evidence the government acted reasonably. She admitted to signing hundreds of employee checks, facilitating payroll, paying bills, buying supplies, and even using the company’s debit card.

The judge further noted that Gonzalez served as corporate secretary and board member during the contested periods in 2012 and 2013, and even signed loan documents as an owner after selling her shares. These actions, the court said, created “a strong inference” that she bore responsibility for Camabo’s tax obligations.

Jury Acquittal Didn’t Mean Cost Recovery

Though the jury released Gonzalez from liability and freed her from $1.7 million in liens, Judge Wicks stressed that the IRS’ failed case did not equate to an improper one. Because the government’s claims were not frivolous, Gonzalez was not considered a “prevailing party” eligible for reimbursement.

Gonzalez had argued that the IRS unfairly sought to make her personally liable for what eventually grew to nearly $2 million in tax debt tied to her husband, Boris Gonzalez. But the court concluded the agency’s pursuit was legally defensible.

Counsel and Next Steps

Martha Gonzalez was represented by Jeffrey I. Carton and Craig Matthew Cepler of Denlea & Carton LLP. The government was represented by Julia Glen of the U.S. Department of Justice’s Tax Division. Neither side immediately commented on the ruling.