Category Archives: criminal tax law

According to Law360, the husband of a former president of InfoSpace can be held jointly liable for a nearly $40 million tax debt the IRS asserted against a return they filed for the 2000 tax year, the U.S. Tax Court ruled, saying he didn't qualify for so-called innocent spouse relief.

The court agreed with the Internal Revenue Service that Mark Strom, a former cardiac and thoracic surgeon and husband of a former InfoSpace president and COO, Bernee Strom, knew of his wife's exercising of stock options that led to unreported income of $100.5 million. 

Just Knowing About The Understatement,
The Court Said, Torpedoed His Claim For Relief
From Joint And Several Liability.

Bernee Strom received incentive and nonstatutory stock options when tech company InfoSpace hired her in 1998, and she exercised the nonstatutory options in 2000, the decision said. The couple talked with advisers and chose to defer calculation and recognition of most of the income attributable to exercising options in 2000 to the 2021 tax year when the market value of the company's stock was much lower, according to the decision. The plan resulted in more than $100 million in income being left off the Stroms' 2000 return, the court said.

Mark Strom was involved in the exercising of the options and the talks with lawyers and tax consultants to develop "tax-favorable" reporting positions on the 2000 return and approved those positions, according to the decision. Holding Mark Strom jointly liable for the resulting taxes assessed by the IRS is fair because he knew all the facts pertaining to the transactions, the court said.

Internal Revenue Code Section 6015 governs relief from joint and several liability on joint tax returns. Mark Strom sought innocent spouse relief in 2009 and again in 2012, both for the 2000 tax year, the decision said.

 Have an IRS Tax Problem? 

 

   
Contact the Tax Lawyers at 

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 January30th 2024 we posted Two Men Indicted On Charges Of Peddling Abusive Trusts, where we discussed that two men promoted and sold abusive tax shelters for the last six years by instructing their clients to use sham trusts to hide business income and illegally deduct personal expenses such as family weddings, according to an indictment in a Colorado federal court in the case of U.S. v. Conner et al., case number 1:23-cr-00390, in the U.S. District Court for the District of Colorado.

Now according to the DoJ, an Arizona man pleaded guilty on May 17, 2024 to two counts of assisting in the preparation of false tax returns for individuals who used an abusive-trust tax shelter to underreport their income and tax liabilities.

According to court documents and statements made in court, from 2017 to 2023, Kent Ellsworth operated Ellsworth Stauffer P.C., a return preparation business. During that time, Ellsworth participated in a scheme to defraud the IRS that involved the promotion, sale and implementation of a fraudulent tax shelter. Ellsworth participated by preparing and filing over 500 false tax returns for approximately 60 clients nationwide who used the tax shelter to conceal income from the IRS and not pay tax. Ellsworth intentionally caused more than $60 million in income to be fraudulently sheltered from the IRS, which resulted in a tax loss to the IRS of approximately $17 million.

Ellsworth Prepared The False Tax Returns To Further The Abusive-Trust Tax Shelter Scheme Carried Out By Others.

Clients who purchased the tax shelter, most of whom were successful business owners, were directed to assign or “donate” nearly all of their income to sham trusts and a so-called “private family foundation” to create the illusion that the income was not theirs. However, the sham trusts and foundations were nothing more than bank accounts designed to hold funds the clients earned and continued to control. 

To carry out the scheme, Ellsworth was taught how to prepare tax returns utilizing the scheme’s fraudulent methods. He was instructed to report all income assigned to a sham trust as income of the trust and to offset that income by deducting all expenses paid for by the trust, including the clients’ personal living expenses. Ellsworth was paid fees for preparing the returns by the clients participating in the tax shelter.

Ellsworth is scheduled to be sentenced on Aug. 14. He faces a maximum penalty of three (3) years in prison for each count of preparing and filing false tax returns. Ellsworth also faces a maximum fine of $250,000, a period of supervised release and the costs of prosecution for each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Have An Abusive Trust?

Do You Like Your Freedom?

Contact the Tax Lawyers at

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

According to Law360, The former chief financial officer of a Russian gas company who was sentenced to seven years in prison for hiding money in Swiss banks can't escape the government's civil suit seeking nearly $44 million in reporting penalties, a Florida federal judge ruled Wednesday.

In an order denying a dismissal request by ex-Novatek CFO Mark Gyetvay, U.S. District Judge John L. Badalamenti said the government had sufficiently alleged that Gyetvay had willfully failed to file a foreign bank account report, or FBAR, for 2014 on a Swiss account.

Who Retained A Swiss Wealth Firm To Help Him Hide 

Have an FBAR Penalty Problem?  

 

Never Stop Arguing
Legal Basis for Abatement!

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

 

 

for a FREE Tax Consultation at: 

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

On May 3, 2024 the the D.C. Circuit Court of Appeals overturned the Tax Court's decision in Farhy v. Commissioner, 160 T.C. No. 6 (2023), which held that the IRS was without the authority to assess the Form 5471 imposed by Internal Revenue Code §6038(b). 

So Where Does That Leave Us?

For one thing this Appeal's decision controls cases, in the DC circuit.

It is also persuasive authority for other circuits, as it relates to interpreting IRC §6038(b) in that it would be unlikely if not just inconsistent for Congress to allow the IRS to assert penalties under §6038(c), but not under §6038 (b) and it goes on to buttress its decision with Congressional Reenactment Doctrine by stating:

"[Our court's] conclusion is buttressed by more than forty years of congressional acquiescence
to the IRS’s practice of assessing section 6038(b) penalties. 'It is well established that when
Congress revisits a statute giving rise to a longstanding administrative interpretation without
pertinent change, the ‘congressional failure to revise or repeal the agency’s interpretation
is persuasive evidence that the interpretation is the one intended by Congress.’ Since adding
subsection (b) in 1982, Congress has amended section 6038 seven times; each time, it has
left undisturbed the IRS’s practice of assessing and administratively collecting penalties
imposed under section 6038(b)."

Whether the Congressional Reenactment Doctrine in this decision is dicta and does not need to be followed, I leave up to each of you.

Furthermore, the Tax Court in Mukhi v. Commissioner of Internal Revenue, stated that even though Farhy is on appeal in the D.C. Circuit, Mukhi's case, if appealed, would go to the Eighth Circuit, meaning any ruling from the D.C. Circuit wouldn't be binding for Mukhi, the court said.

So you can still argue that the IRS cannot assess certain information reporting penalties in other circuits and in Tax Court. Whether you be successful, still remains to  be seen?

     Contact the Tax Lawyers at

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