Monthly Archives: September 2020

According to DoJ, Marcus “Marc” Dunn was a licensed attorney in Ohio. From 2007 until his client Dr. Kevin Lake died, Dunn advised and assisted Dr. Lake in legal matters relating to the operation of his clinics, including Columbus Southern Medical Clinic in Columbus, Ohio. At the time, Dunn specialized in tax law. 

Around 2010, the IRS audited Dr. Lake’s entities. In response to an IRS revenue officer’s request for documentation supporting the entities’ claimed clinical equipment depreciation deductions, Dunn provided false “bills of sale” purporting to support the deductions, but which in fact falsely inflated the value of the equipment. At the same time that Dunn provided these inflated values to the IRS, he provided contradictory valuation information to third parties. 

In 2009 and 2010, the IRS audited a number of corporate entities controlled by Dr. Lake. When the agent conducting the audits requested documents supporting certain tax positions taken by Dr. Lake regarding the clinic’s equipment, Dunn provided “bills of sale” appearing to support the false depreciation deductions that Dr. Lake’s entities had claimed. (REALLY?) The IRS determined that these bills of sale were false in that they inflated the value of the clinic’s equipment. 

At the same time Dunn supplied these documents to the IRS, he had provided contrary information regarding the true value of the clinic equipment to third parties. (You can not make up this type of unprofessional conduct at best and/or stupidity at worse!)

And as if that was not bad enough, in 2011, Dunn filed petitions in U.S. Tax Court challenging the IRS’s determination that some of the audited entities owed additional taxes. The case was ultimately settled with an agreement that approximately $608,583 was due. 

Then the pies de la resistance, Dunn knowingly provided false and purposely misleading information to the revenue officer about two of the three Lake entities by telling her that:

• the entities at issue were closed; 
• he had no idea who the officers of the entities were; 
• the entities had no assets; 
• an IRS 433-B would be all “zeros;” and 
• he did not know where the entities banked

when the IRS revenue officer attempted to collect the settlement amount in 2014.

At least partially due to Dunn’s statements, the revenue officer closed the collection cases because she believed the entities were defunct with no assets. In all, Dunn caused a tax loss of $513,960 to the United States. 

On Nov. 26, 2018, Dunn pleaded guilty to corruptly endeavoring to impede and obstruct the IRS and the Supreme Court of Ohio suspended Dunn’s license to practice law in March 2019. The parties agree that Dunn is responsible for a tax loss of $507,198. 

The loss has since been paid to the IRS using funds seized from Dr. Lake, who pleaded guilty in January 2017 to drug, tax and fraud charges; Dr. Lake died before sentencing.

In addition to the 18 month prison sentence, U.S. District Judge Michael H. Watson ordered Dunn to serve 3 years of supervised release. Restitution to the government has already been paid using funds seized from Dr. Lake.

Have IRS Tax Problem?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog

The Government Accountability Office (GAO) released its July 2020 report on abusive tax schemes with a focus on offshore insurance products and associated compliance risks. (GAO-20-589)

Depending on their structure, insurance products held offshore can be designed to aid in unlawful tax evasion by U.S. taxpayers, the report noted. "While taxpayers may lawfully hold offshore insurance products, they contain features that make them vulnerable for use in abusive tax schemes," GAO said. For example, offshore insurance products can be extremely technical and individualized, creating formidable enforcement challenges. In addition, since insurance is not defined by federal statute, there is a potential problem in determining what constitutes genuine insurance for federal tax purposes, the report said.

"Two products that IRS has recently warned have the potential for such abuse include micro-captive insurance and variable life insurance policies," GAO said. "Offshore micro-captive insurance products, which are made by small insurance companies owned by the businesses they insure, may be abused if the corporate taxpayer improperly claims deductions for payments made to a micro-captive for federal tax purposes," the report said.

"The micro-captive insurance product is not insurance for federal income tax purposes when the product, for example, does not conform to commonly accepted notions of insurance, but the insured claims deductions for premiums on federal income taxes," GAO said.

One consideration of the courts is whether the insurance legitimately distributes risk across participating entities, it said, adding that IRS must expend significant resources reviewing such schemes.

"Offshore variable life insurance products, which are insurance policies with investment components over which the insured has certain control, may be abused if the individual taxpayer fails to meet IRS reporting requirements or pay appropriate federal income taxes," GAO said. Taxpayers with certain foreign life insurance accounts are required to report this information to IRS and the Financial Crimes Enforcement Network, the report noted.

This observation is nothing new in that variable policies (both offshore and domestic) have the potential for tax abuse where “some taxpayers closely control how their premiums are invested and may direct premium funds toward illiquid assets they currently own in an attempt to convert taxable income to tax exempt income that is eventually passed on to their beneficiaries tax-free.”  

This abuse is more commonly called a violation of the “investor control” rule or doctrine, which undermines the validity of any offshore or domestic life insurance policy.  

The tax benefits of making investments through private placement life insurance (“PPLI”), including investments in hedge funds, are very significant (i.e., the potential elimination of income tax and possibly estate tax as well). 

The IRS has long maintained that to achieve the tax benefits of tax-free inside build-up in a life insurance policy the taxpayer must not retain sufficient control and incidents of ownership over the assets in the separate account of the insurance company so as to be treated as the owner of those assets for income tax purposes. 

For the last 30 years it was not clear that the IRS has had the authority to impose this doctrine. However, in a decision filed on June 30, 2015, the Tax Court in Webber v. Commissioner, upheld the IRS’s imposition of tax on investment returns based on the investor control doctrine, but refused to apply any penalties.

The application of the investor control doctrine is very fact specific and the Court, in a very lengthy opinion, determined that Webber effectively dictated the investments made by the insurance company separate accounts.

However, they do increases tax risks for any policyholder who has control over the underlying investments.

Want To Know More About The Tax Benefits of

Properly Structured PPLI Or Annuities?

 Contact the Tax Lawyers 

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

The IRS on September 1, 2020 released an advance version of Notice Notice 2020-69 that announces the IRS and Treasury Department intend to issue regulations addressing the application of sections 951 and 951A to certain S corporations with accumulated earnings and profits.

Notice 2020-69 also announces that future regulations will be issued to address the treatment of qualified improvement property (QIP) under the alternative depreciation system of section 168(g) for purposes of calculating qualified business asset investment (QBAI) with regard to the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) provisions—measures that were enacted part of the U.S. 2017 tax law (Pub. L. No. 115-97), or the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA).

Notice 2020-69 provides:

·   A summary of the current and proposed treatment of domestic partnerships for purposes of section 951 and 951A and the application of these rules to S corporations

·   Background on sections 168, 250, and 951A as they relate to QBAI for purposes of FDII and GILTI and the treatment of QIP under the alternative depreciation system

·   A description of the anticipated proposed regulations concerning the application of section 951 and 951A to S corporations

·   A description of the forthcoming proposed regulations concerning the treatment of QIP under the alternative depreciation system for purposes of calculating QBAI for FDII and GILTI

·   A description of the proposed applicability dates of the forthcoming regulations

·   A request for comments

 Contact the Tax Lawyers 

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

On October 29, 2019 we posted The IRS is Now Criminally Prosecuting Employers For Failure To Pay Withheld Payroll Taxes! where we discussed that the IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes.

Then on June 4, 2020  we posted Another Employer Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and on June 29, 2020 we posted More Employers Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and now according to DoJ, a Richmond, Virginia, businessman pleaded guilty on September 3, 2020 to failing to collect, truthfully account for, and pay over employment taxes. 

According to documents and information provided to the court, Rama Gogineni was president and director of Computech Services Inc., a technology consulting services firm in Richmond, Virginia. Gogineni was also responsible for collecting, truthfully accounting for, and paying over to the IRS Social Security, Medicare, and income taxes withheld from his employees’ wages. Beginning as early as 2007 and through 2015, Gogineni did not pay over more than $980,000 in employment taxes to the IRS. 

During This Time, Gogineni Entered Into Three Separate Installment Agreements With The IRS Committing To Make The Payments, But Defaulted Each Time.

U.S. District Judge David Novak scheduled the sentencing for Feb. 10, 2021. 

At sentencing, Gogineni faces a maximum sentence of five (5) years in prison, as well as a period of supervised release, restitution, and monetary penalties. 

Thinking of Borrowing From Your Company's

Payroll Tax Withholdings?

You Better Thank Again, if You Like Your Freedom!

Have Payroll Tax Problems?

 

 

 Contact the Tax Lawyers at 

Marini & Associates, P.A.  

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

orToll Free at 888-8TaxAid

 

Read more at: Tax Times blog