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US Real Estate Investments & Anonymous Entities Again in Spotlight for US Money Laundering!

February 1, 2016

 
On Thursday, January 14, 2016  we posted U.S FinCEN Will Track Secret Buyers of Luxury Real Estate in Manhattan and Miami where we discussed that the Financial Crimes Enforcement Network (FinCEN) on January 13, 2016 issued a Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay "all cash" for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.
 

The initiative is part of a broader federal effort to increase the focus on money laundering in real estate. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales that involve shell companies like limited liability companies, often known as L.L.C.s; partnerships; and other entities.

The Treasury’s program will affect billions of dollars in real estate transactions. In Manhattan, the initiative requires buyers in sales of more than $3 million to be reported; in Miami-Dade County, it requires reporting on sales of more than $1 million. In Manhattan, 1,045 residential sales cost more than $3 million in the second half of 2015, worth some $6.5 billion in aggregate, according to PropertyShark, a real estate data company.

 
With attention growing on the use of shell companies in high-end real estate, an activist organization released a report Sunday January 31, 2016 that said several New York real estate lawyers had been caught on camera providing advice on how to move suspect money into the United States. This investigation was covered in the New York Times and is the result of an undercover investigation carried out in 2014 by Global Witness, a nonprofit activist organization that has been pushing for stricter money-laundering rules.
 

We all know what it feels like to get ripped off or scammed. But we know less about the tools the criminals use to get away with their illicit activities.  Global Witness has previously looked at a whole range of crimes, and found they all had one thing in common - They were all carried out by anonymous company owners, who are able to skirt U.S. laws and launder money through our financial system. If these sham companies did not exist, those crimes would be far harder to commit.
 
 

The key findings from the investigation are:

  • Lawyers from 12 of the 13 firms we visited suggested using anonymous companies or trusts to hide the minister’s assets. All but one of these firms recommended using American companies.
  • One of the lawyers was the President of the American Bar Association at the time.
  • Several lawyers suggested using their law firms’ own bank accounts to help prevent U.S. banks realizing whose money it really was, or to have the lawyer act as a trustee of an offshore trust and use this position to open a bank account.
  • While most of the lawyers asked for some information about the minister, and his source of funds, only one lawyer refused to provide assistance during the meeting itself.
 
Lawyers who were named in the report, or their representatives, told The Times that they took issue with Global Witness’s undercover methods.
 
This week, a bipartisan group of lawmakers is planning to introduce a bill in the House of Representatives to require more transparency into shell companies nationwide. And later this week, activists in London will hold what they are calling a Kleptocracy Tour, a bus ride past properties that they said had been associated with illicit money. They plan to hold a similar tour in New York in April.
 

 

 
Need Experience Legal Advice for
Your US Real Estate Investments?

 
 
 

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


for a FREE Tax Consultation

Toll Free at 888-8TaxAid (888)882-9243.

 
 
 

 
 

 

Read more at: Tax Times blog

Tax Court Rules That Tax Refunds Are Included in Decedant's Estate

December 1, 2015


A matter recently litigated in the United States Tax Court, in Estate of Badgett v. Commissioner, clarifies the situation which most people don't even think about when they prepare a 706 for a US  decedent.  At the time of his death this decedent had not yet filed a 1040 for the year in which he died. Subsequent to his death, a 1040 was filed resulting in a refund to the estate in excess of $400,000.

 
The estate, on the 706, opined that the $400,000 refund was not an asset of the estate and did not include it in the estate. The IRS took umbrage at this position. The IRS's position, supported by section 2031, indicates that all property, real, personal, tangible or intangible wherever situated is includable in the decedent's gross estate. 

The estate, in the tax court case, took the position that in order to be included in the decedent's estate, the refund must already have been in existence at the date of death, not merely a possibility or expectation. Clearly this flies in the face of a number of cases in which the decedent was to have been a beneficiary of a contract or a shows in action. Although the receipt of the money is merely a possibility or an expectation, it is still includable in the decedent's estate. In the case of a tax refund, the amount is finite. In the case of a shows in action or contractual obligation, one could argue, depending on the facts and circumstances, that the amount to be included in the gross estate was less than 100% of the value listed on the contractual obligation since a possibility of litigation exists, the right of which may well diminish the contractual obligation from the amount listed on the contract. 

The  estate's final argument, one which fell on deaf ears, was that there was no guarantee that the IRS would refund the full amount of the refund. Clearly this is a misunderstanding of tax refunds.  In the case that the IRS has no outstanding liens or assessments against a taxpayer, the amount of the refund is 100% of the amount listed on the tax return (barring mathematical error).  It is true however, that if there is an outstanding lien or obligation to the IRS, the amount of the obligation will be netted against the refund. In this particular case, the decedent  had no outstanding obligations to the IRS so the full amount of the refund is includable in the decedent's estate.
 
 

 Have a US Estate Tax Problem?
 

Estate Tax Problems Require
an Experienced Estate Tax Attorney
Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).

Robert S. Blumenfeld  - 
 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.



 

Read more at: Tax Times blog

Estate Responsible for Penalties For Decedent's Failure to Report Foreign Trust

February 27, 2012

The Internal Revenue Service Office of Chief Counsel, in a chief counsel advice memorandum released Feb. 24, said an estate is responsible for Section 6677 penalties for failure to file information returns regarding foreign trusts for tax years ending prior to the decedent's death.

The estate is responsible for “initial” penalties asserted against the decedent where Forms 3250, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and 3250-A, Annual Information Return of Foreign Trust With a U.S. Owner, were not timely filed with respect to a foreign grantor trust established by the decedent, the office said in CCA201208028

Read more at: Tax Times blog

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