"Yes, sir." I heard a click, then a mealy-mouthed male voice, which I immediately took a disliking to, said, "Mr John Sutter?" "Yes."
"My name is Stephen Novac, a revenue agent with the IRS."
"Yes?"
"I'd like to stop up and discuss some matters with you."
"What matters?"
"Serious matters, Mr Sutter."
"Concerning what and whom?"
"I'd rather not say over the phone."
"Why not?" I asked lightly. "Are your phones tapped by the Taxpayers' Revolt Committee?" I waited for a polite chuckle, but there was none. Not good. I also waited for the word "Sir", but didn't hear that either. I pulled my calendar toward me. "All right, how about next Wednesday at -" "I'll be there in half an hour, Mr Sutter. Please be there and allow an hour for my visit. Thank you."
The phone went dead. "What nerve -" I buzzed Louise. "Clear my calendar until noon. When Mr Novac shows up, keep him waiting fifteen minutes." "Yes, sir."
I stood, walked to the window, and looked down on Wall Street. Money. Power. Prestige. Corporate grandeur and layers of insulation against the world. But, Mr Stephen Novac, of the IRS, had done in fifteen seconds what some people couldn't do in fifteen days or weeks; he had breached all the fortifications and would be sitting in my office on the very same morning he'd called. Incredible. Of course I knew by the tone of the man's voice and by his arrogance that this must be a criminal matter. (If it turned out to be a civil case, I'd throw him out the window.) So the question remained, which criminal was Mr Novac coming to see me about? Bellarosa? One of my clients? But Novac would not be that arrogant if he were looking for my cooperation. Therefore, he was not looking for my cooperation. Therefore… At eleven-fifteen, Mr Stephen Novac was shown into my office. He was one of those people whose telephone voice exactly matched his looks. After the mandatory limp handshake, Mr Novac showed me his credentials which identified him as a special agent, not a revenue agent as he'd said. A special agent, in case you haven't had the opportunity to meet one of these people, is actually with the IRS Criminal Investigation Division. I said to him, "You misrepresented yourself over the telephone."
"How so?"
I told him how so and added, "You're speaking to an attorney, Mr Novac, and you've gotten yourself off on the wrong foot." Of course, the man was royally pissed off and would now take every opportunity to stick it to me. But I had the feeling he was going to do that anyway. "Sit," I commanded. He sat. I remained standing and looked down at him. That's my little power play. Mr Novac was about forty, and anyone still in the IRS after all those years was definitely a career officer, a pro. Sometimes they send kids over, spanking new CPAs or attorneys with the ink still wet on their diplomas, and I chew them up and spit them out before they even open their briefcases. But Stephen Novac looked cool, slightly smug, the way any cop is when he knows he has the full weight of the law in his badge case. He seemed not at all impressed with his surroundings, not intimidated by all the accoutrements of rooted, generational jurisprudence. This was not going to be pleasant. "What can I do for you, Mr Novac?"
He crossed his legs and took a small notebook out of his pocket. He perused it without replying.
I had the urge to throw him out the window, but they'd just send another one. I regarded Novac a moment. He had on an awful grey poplin cotton suit, the sort of thing that prisons issue when they set you free. He wore shoes that actually had gum soles, and the uppers were made of a miracle synthetic that could be safely cleaned with Brillo. His shirt, his tie, socks, watch, even his haircut, were all bargain basement, and I found myself irrationally offended by the man because of the air of sensible frugality about him. Actually, I hate a man who won't splurge on a good suit.
What I really didn't like about Novac, of course, was that he was in my office to ruin my life. At least he could have come better dressed. "Mr Novac," I said, "can I help you find something in that book?" He looked up at me. "Mr Sutter, you bought a house in East Hampton in 1971 for $55,000. Correct?"
Innocuous as that question may seem to you, it was not the question I wanted to hear. I replied, "I bought a house in East Hampton in the early 1970s for about that price."
"All right. You sold it in 1979 for $365,000. Correct?"
"That sounds about right." Best investment I ever made.
"There was, then, a net long-term capital gain on the transaction of $310,000.
Correct?"
"No. There was a gross gain of $310,000. There's a difference between net and gross, Mr Novac. I'm sure they taught you that i school, even if the IRS doesn't know the difference." Easy, Sutter.
He looked at me. "What, then, was your net capital gain?" "You subtract capital improvements and other costs from the gross, and that's what we call the net in the world of private enterprise." "And how much was that, Mr Sutter?"
"I have no idea at this moment."
"Neither do we, Mr Sutter, since you never reported a dollar of it." Touche, Mr Novac. I replied aggressively, "Why should I report it as income? I bought another house in East Hampton for over $400,000. Therefore, the capital gain, whatever it is, was deferred. Would you like me to show you the pertinent section of the tax code?"
"Mr Sutter, you had eighteen months according lo the law at that time to roll over the gain – to purchase a house with the proceeds of the house you sold in order to defer the capital gain. You waited twenty-three months before you bought the house on Berry Lane in East Hampton, in January of 1981. Therefore, a tax event took place, and you should have computed and paid taxes on your capital gain." He added, "You failed to report a significant amount of income." The man was right, of course, which was why he was still sitting there and not being tossed bodily out into the hall. But lest you think I am a crook, there is an explanation. I said to Mr Novac, "My intention was to build a house. The law, you may have heard, allows twenty-four months to roll over the capital gain if you build instead of buy."
Mr Novac replied, "But the house you bought and still own on Berry Lane was not built by you. It was an existing house, according to my research." "Yes. I had a binder on a piece of land on which I was going to build my house, but the seller reneged at the last moment. I began an action against him, but we settled. There are court records to substantiate that. So, as you can see, Mr Novac, my intention to build a new house was aborted. The clock was ticking, and I knew I could not find land and begin construction to satisfy the government's inane tax rules, which I think are an intrusion into my rights as a free citizen to make economic decisions based on my needs and not the government's. Therefore, Mr Novac, being thwarted in my intention to build, I quickly bought an existing house – the one on Berry Lane, which is quite nice, and if you're ever in East Hampton, drive by." I added, "To avoid taxes is legal, to evade taxes is illegal. I avoided. Thank you for stopping by on government time. I like to see how my tax money is spent." I walked to the door and opened it, adding, "I'll send you the pertinent records and court papers regarding the land deal that fell through, so you don't have to dig them up out in East Hampton. Please leave your card with my secretary."
But Mr Novac was not on his way out the open door. He remained seated and said, "Mr Sutter, you did not fulfil the requirements to buy a house within eighteen months. Therefore, a tax event took place at that point in time. There is nothing you can do or say retroactively to change that tax event." He added, "You have broken the law."
Now, you have to understand how these people think. Mr Novac was certain that I had committed not only a crime under the ever-changing tax code, but that I had sealed my fate for eternity when a tax event took place without my notifying the government of it. Truly the angels in heaven were weeping for me all these years. Confess, said Mr Novac, repent and you will be absolved of this sin before we burn you at the stake. No, thanks. I closed the door so as not to upset Louise and moved toward Mr Novac, who stood his ground, or more precisely remained on his ass. "Mr Novac," I began at low volume, "in this great nation of ours, a citizen is innocent until proven guilty." Turning up the volume now: