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• Four (4) months in federal prison for willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR), in violation of Title 31, United States Code, Sections 5314 and 5322(a). 
• Quintero was also sentenced to three (3) years of supervised release with 250 hours of community service, and a $20,000 criminal fine. and
• Quintero also paid a $2 million civil penalty for the FBAR violation.

1. Whether the promise to repay was evidenced by a note or other instrument;
2. Whether interest was charged;
3. Whether a fixed schedule for repayment was established;
4. Whether collateral was given to secure payment;
5. Whether repayments were made;
6. Whether the borrower had a reasonable prospect of repaying the loan and whether the lender had sufficient funds to advance the loan; and
7. Whether the parties conducted themselves as if the transaction was a loan.

The Tax Court concluded that $400,000 distribution from UEBF didn't constitute a bona fide loan. (Todd, TC Memo 2011-123) In reaching this conclusion, the Court analyzed the seven factors used to determine if a bona fide loan exists. It found that five factors indicated that the parties didn't intend to establish a debtor-creditor relationship at the time the funds were advanced (Factors 1, 2, 3, 5, and 7), while one factor did (Factor 6), and one indicated a possible intent to do so (Factor 4).

1. Presence of a note. Despite the requirements in their agreement, the debt wasn't contemporaneously memorialized when the money was distributed. Further, the terms of the trust agreement and note weren't followed: UEBF failed to charge a market rate of interest, and Todd failed to make quarterly payments;
2. Interest rate. Todd was charged 1% interest rate by UEBF on the promissory note, lower than the market rate. In comparison, Southland charged a rate of 4.76% on a similar loan;
3. Repayment schedule. UEBF didn't provide Todd with an amortization schedule reflecting quarterly payments until three months after the first payment was due under the note's terms, and the note wasn't executed until almost four months after the first payment was due;
4. Collateral. At the time of the purported loan, Todd didn't own the policy (UEBF did), had no access to the cash value of the policy, and had no rights to the proceeds from the policy. However, the Tax Court found that the dual repayment mechanism could serve as security between the parties for the promissory note. The dual repayment mechanism allowed UEBF to deduct the $400,000 distribution from the death benefit obligation;
5. Repayments. As of the date of trial, Todd hadn't made any payments toward the purported loan. The Court rejected Todd's argument that the dual repayment mechanism served as a valid method of repayment (although it had accepted that it could serve as security). Because the purported benefits under the DBO plan were contingent on multiple future events (e.g., Corporation might cease participation in the UEBF plan, the covered employee might be terminated or retire, or the master contract group and the union might not renew their agreement), Todd couldn't reasonably rely on the death benefit as an alternative payment;
6. Prospect of repaying. Todd earned a substantial living as a neurosurgeon, so there was a reasonable prospect of his repaying the purported loan; and
7. Parties' conduct. Neither UEBF nor Todd conducted themselves in a manner indicating that the distribution was a loan. Neither strictly abided by the note's terms. There was no inquiry into the hardship justifying the loan. The interest rate was below market. No quarterly payments were made. UEBF never attempted collection when quarterly payments weren't made.

The top tax rate on long-term capital gains is currently 15%.  That revelation has set off a familiar debate about whether that low rate is appropriate. Often overlooked in these discussions, however, is the fact that the days of the 15% tax rate are numbered.

On January 1, 2013, capital gains taxes are scheduled to go up sharply:

First, the 2001 and 2003 tax cuts are scheduled to expire. If that happens, the regular top rate on capital gains will rise to 20%. In addition, an obscure provision of the tax code, the limitation on itemized deductions, will return in full force. That provision, known as Pease, increases effective tax rates on high-income taxpayers by reducing the value of their itemized deductions. On net, it will add another 1.2 percentage points to the effective capital gains tax rate for high-income taxpayers.

The database allows the DHS to identify taxpayers with unpaid tax assessments who are traveling to the United States (Internal Revenue Manual (IRM), §5.1.12.26).  

U.S. or non-U.S. persons with an unpaid federal tax liability whom the IRS has been unable to contact may be unaware of the tax debt until they come through U.S. Customs and are detained by Immigration and Customs Enforcement (ICE). ICE agents may ask them what assets they have in the United States, the purpose and duration of their trip, where they are staying, vehicle registration information, and similar information. The agents also may inquire about a taxpayer’s employment relationships in the United States or any personal services performed in the United States, to establish wage garnishment opportunities. Thereafter, ICE agents alert an IRS coordinator and transmit this information through a referral program. Typically, an investigation request is sent to an IRS agent in the region in which the taxpayer is traveling to follow up with the taxpayer.

To be entered into TECS, the taxpayer must live outside the United States and its commonwealths or territories (or “is about to depart to reside in a foreign country” or “travels outside the United States … on a frequent basis and [IRS agents] have not been able to contact the taxpayer”) and be subject to a filed Notice of Federal Tax Lien (IRM, §5.1.12.26.5.1).  

The IRS may file a federal tax lien on a taxpayer’s real or personal property under Sec. 6321 when the taxpayer fails to pay taxes allegedly owed after the notice-and-demand period expires. A properly filed federal tax lien publicly alerts creditors that the IRS has a priority claim against the taxpayer’s real or personal property. If the IRS files a federal tax lien in the wrong location, it will not have priority over a later purchaser, holder of a security interest, mechanic’s lien, or judgment lien creditor.

A federal tax lien is filed in the office designated by the state where any real property owned by the taxpayer is located (Sec. 6323(f)) and is a public record. For personal property, the federal tax lien ordinarily is filed in the county in which the taxpayer resides or in any other office designated by state law. However, taxpayers who reside outside the United States are deemed to reside in Washington, D.C., for lien-filing purposes. Accordingly, the Notice of Federal Tax Lien is filed with the Recorder of Deeds for the District of Columbia (IRM, §5.17.2.3.2).

A withdrawal or release of the lien, along with certain other prerequisites, is required for removal of the taxpayer’s information from TECS. Thus, the lengthy process may result in detention at the border for travelers to the United States for a period after the IRS has withdrawn or released a lien.

A taxpayer who resides outside the United States may not be aware of outstanding federal tax liabilities if the address on record for the taxpayer is outdated or otherwise incorrect. Consequently, tax advisers with clients who reside outside the United States should ensure that the correct address for the taxpayer is used on the client’s returns and, if the client no longer is required to file U.S. returns, that the IRS still is able to contact the taxpayer about previously filed returns. Taxpayers should be advised that a failure to keep the IRS apprised of a change in mailing address may result in an unwelcome—and potentially embarrassing—surprise when the taxpayer seeks to enter the United States.