According to DoJ, a Miami-Dade County investor has pleaded guilty to filing a false tax return in an effort to shield $30 million in trading proceeds from capital gains taxes, federal prosecutors announced.
Suresh Gajwani, 78, admitted to submitting fraudulent documents to the Internal Revenue Service, falsely claiming his company qualified for tax exemptions under Puerto Rico’s Act 60. Prosecutors say Gajwani retroactively converted his company to an S Corporation to exploit the tax incentive program, which is intended for bona fide Puerto Rican residents.
The scheme allowed Gajwani to avoid paying approximately $7 million in capital gains taxes for 2019. As part of his plea agreement, he will pay $15.3 million in restitution, covering taxes, interest, and penalties.
According to the facts admitted at the change of plea hearing, in 2018, Gajwani was a resident of Miami-Dade County. In October 2019, Gajwani owned a company that held stocks and options that had substantially appreciated in value by tens of millions of dollars. In anticipation of the tax on those gains, Gajwani sought to take advantage of a tax incentive program offered pursuant to Puerto Rico Act 60. Under the program, bona fide residents of Puerto Rico could apply for an exemption from federal taxes on certain capital gains realized after the individual became a Puerto Rican resident. Gajwani did not become a bona fide resident of Puerto Rico until January 1, 2020, which was after the stock portfolio had accrued built-in gains.
Gajwani was advised by an accountant and attorney to convert his company to a small business corporation (known as an S Corporation) under the Internal Revenue Code to take advantage of the Puerto Rico capital gains tax exemption. Gajwani was also advised by an attorney that built-in gains for U.S. residents accrued prior to becoming a resident of Puerto Rico could be exempt from federal taxes.
In order to convert the company retroactively, in January 2020, Gajwani submitted a false document to the IRS that claimed that the company had intended to convert as of January 1, 2019. Gajwani knew that he did not intend to treat the company as an S Corporation as of January 1, 2019, and that the real reason for the submission of the paperwork to the IRS was to avoid paying capital gains taxes. Based upon Gajwani’s false statement, the IRS granted Gajwani’s request.
In 2019, Gajwani’s company had a portfolio with approximately $30 million in built-in gains. Had the IRS not allowed Gajwani’s company to convert to an S Corporation retroactively, the company would have owed approximately $7 million in capital gains taxes for 2019.
Gajwani faces up to three years in prison. Sentencing is scheduled for August 30, 2025, before Chief U.S. District Judge Cecilia M. Altonaga.
Federal authorities say the case highlights their commitment to prosecuting tax fraud and ensuring that all taxpayers play by the rules.
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