Tax Court Judge Diane Kroupa found that intervenor Bernice Nalls, the spouse of petitioner Leonard Harbin “effectively exercised exclusive control over the prior deficiency case as it related to the deficiencies at issue” which she said “stemmed from intervenor's gambling activities.” Kroupa said that Harbin depended on Nalls to contest the deficiencies at issue and Harbin only participated in the prior deficiency case through a lawyer's representation.

Attorney James E. Caldwell represented both Harbin and Nalls in the 2004—2005 Tax Court litigation which included claimed deductions for gambling losses (Docket No. 10774-04). In the litigation, the couple and the Internal Revenue Service executed a stipulated decision that petitioner and his spouse owed deficiencies and accuracy-related penalties for 1999 and 2000.

Caldwell did not explain the advantages and risks of joint representation to Harbin, Kroupa said, and Caldwell proceeded with the joint representation of Harbin and Nalls “despite the conflict of interest.” Caldwell also represented both Harbin and Nalls “in their contentious divorce” which was finalized in 2004.

Text of this decision is available at http://www.ustaxcourt.gov/InOpHistoric/HarbinDiv.TC.WPD.pdf