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Scams > Tax
Shelters > Tax
The tax shelter industry began unraveling with the realization that Enron
and other large corporations and their officers, directors and major shareholders
were engaging in illegal tax strategies. These strategies were often developed
by the largest accounting firms in the world, such as Arthur Andersen, KPMG,
BDO Seidman, Ernst & Young, and Deloitte & Touche. These firms, in
conjunction with a number of prominent law firms developed planning techniques
that resulted in billions of dollars being illegally sheltered from taxation.
The strategies developed by these firms eventually trickled down to smaller
firms. These firms repackaged the strategies and sold them to their client
bases around the country. As the strategies became more widely employed, the
strategies began coming to the attention of the Internal Revenue Service.
When the strategies were exposed to the light of day, it became apparent that
these strategies often went too far. The result is that the IRS has made many
of these strategies “listed
transactions.” With this new status,
the taxpayers utilizing these strategies were forced to file new disclosure
statements on form 8886 even if the strategy was not listed at the time they
employed it. The filing of these forms will often lead to an audit and the
assessment of additional taxes, penalties and interest for having utilized
the strategies. Some taxpayers have even found themselves facing tax evasion
charges and facing the possibility of spending time in Federal prison. One
such individual, prominent laser eye surgeon Dr. Glen Kawesch, recently pled
guilty to tax evasion in San Diego for employing a strategy advised by an attorney
even though he had been provided an opinion letter stating the strategy was
Prominent among the strategies being scrutinized by the IRS are international
deferred compensation plans (also known as Irish Employee Leasing), the use
of Roth IRAs to own factoring companies, the abuse of S-corporation/ESOP strategies,
the use of the S-corporation charitable contribution strategy, and several
other potentially abusive strategies.
Often, these strategies are accompanied by opinion letters with the idea that
the opinion letter will shield the taxpayer from penalties and prison. The
problem is that many times these opinion letters are provided either by the
promoter of the tax shelter or a firm affiliated with the promoter. What the
promoters don’t tell their clients is that the taxpayer is not entitled
to rely on an opinion letter issued by the promoter or an affiliated firm.
Not surprisingly, the other thing promoters often don’t tell clients
who suddenly find themselves being contacted by the IRS or Criminal Investigation
Division of the IRS, is that the client may have remedies against the promoter.
An attorney who has donated various materials to Quatloos! regarding tax shelters
is tax attorney Joe Petrucelli, who has volunteered to confidentially answer
questions about tax shelters and remedies that Quatloos! readers may have,
by our online form.