California Jury Aquits Banker of Conspiracy to Defraud Using Offshore Bank Accounts

On Halloween day, after just four hours of deliberation, a retired senior vice president at Israeli-based Mizrahi Tefahot Bank Ltd. (MZTF) was acquitted in Los Angeles federal court on charges he helped U.S. customers conceal their assets from the Internal Revenue Service.  

Shokrollah Baravarian, 82, was acquitted of charges of conspiring to defraud the U.S. and helping Mizrahi clients prepare false tax returns. Prosecutors claimed Baravarian helped clients who opened accounts in Israel, didn’t declare them to the IRS and accessed money through loans from the Los Angeles branch.  The jury was not persuaded.  

The U.S. has been campaigning heavily to curtail offshore tax evasion. The IRS, through the US Department of Justice, has charged more than 70 taxpayers and three dozen offshore bankers, lawyers and advisers in offshore tax evasions schemes.  More than 45,000 Americans have avoided criminal prosecution by voluntarily disclosing their offshore accounts to the IRS, paying $6.5 billion in taxes, penalties and interest.   The Baravarian investigation is another blow to the US Government in its war against alleged offshore tax evasion.
 
In January, a U.S. judge in Chicago sentenced H. Ty Warner, the billionaire founder of toymaker Ty Inc. and Ty Warner Hotels & Resorts, to probation. He pleaded guilty to evading almost $5.6 million in taxes on more than $24.4 million in income from accounts with as much as $107 million. Warner faced 46 to 57 months in prison. Prosecutors are appealing.

Last year, a 79-year-old widow, Mary Estelle Curran, who evaded taxes through undeclared Swiss accounts with $43 million was sentenced to less than a minute of probation from a judge who scolded prosecutors.

On November 3, 2014,  after just 90 minutes of deliberation, federal jurors in Fort Lauderdale, Florida, found former UBS AG (UBSN) banker Raoul Weil not guilty of conspiring tohelp as many as 17,000 U.S. taxpayers hide $20 billion from the IRS.  He was arrested last year in Bologna, Italy, and waived extradition.  Weil faced five years in prison and is now a free man.

The US government is aggressively pursuing individuals and bankers for offshore tax evasion.  If you have offshore bank accounts or have been involved in a offshore vehicle, it is extremely important that you seek competent tax counsel who can help you with these matters.  Competent tax counsel can mean the difference between jail and no jail.    The Wilson Tax Law Group is composed exclusively of former IRS Attorneys and Federal Tax Prosecutors.   Our prosecution and IRS background uniquely situates us in the area of criminal tax defense.  Please contact our Newport Beach Office at 949-397-2292 for a consultation.

 wilsontaxlaw.com

California Jury Aquits Banker of Conspiracy to Defraud Using Offshore Bank Accounts

On Halloween day, after just four hours of deliberation, a retired senior vice president at Israeli-based Mizrahi Tefahot Bank Ltd. (MZTF) was acquitted in Los Angeles federal court on charges he helped U.S. customers conceal their assets from the Internal Revenue Service.  

Shokrollah Baravarian, 82, was acquitted of charges of conspiring to defraud the U.S. and helping Mizrahi clients prepare false tax returns. Prosecutors claimed Baravarian helped clients who opened accounts in Israel, didn’t declare them to the IRS and accessed money through loans from the Los Angeles branch.  The jury was not persuaded.  

The U.S. has been campaigning heavily to curtail offshore tax evasion. The IRS, through the US Department of Justice, has charged more than 70 taxpayers and three dozen offshore bankers, lawyers and advisers in offshore tax evasions schemes.  More than 45,000 Americans have avoided criminal prosecution by voluntarily disclosing their offshore accounts to the IRS, paying $6.5 billion in taxes, penalties and interest.   The Baravarian investigation is another blow to the US Government in its war against alleged offshore tax evasion.
 
In January, a U.S. judge in Chicago sentenced H. Ty Warner, the billionaire founder of toymaker Ty Inc. and Ty Warner Hotels & Resorts, to probation. He pleaded guilty to evading almost $5.6 million in taxes on more than $24.4 million in income from accounts with as much as $107 million. Warner faced 46 to 57 months in prison. Prosecutors are appealing.

Last year, a 79-year-old widow, Mary Estelle Curran, who evaded taxes through undeclared Swiss accounts with $43 million was sentenced to less than a minute of probation from a judge who scolded prosecutors.

On November 3, 2014,  after just 90 minutes of deliberation, federal jurors in Fort Lauderdale, Florida, found former UBS AG (UBSN) banker Raoul Weil not guilty of conspiring to help as many as 17,000 U.S. taxpayers hide $20 billion from the IRS.  He was arrested last year in Bologna, Italy, and waived extradition.  Weil faced five years in prison and is now a free man.

The US government is aggressively pursuing individuals and bankers for offshore tax evasion.  If you have offshore bank accounts or have been involved in a offshore vehicle, it is extremely important that you seek competent tax counsel who can help you with these matters.  Competent tax counsel can mean the difference between jail and no jail.    The Wilson Tax Law Group is composed exclusively of former IRS Attorneys and Federal Tax Prosecutors.   Our prosecution and IRS background uniquely situates us in the area of criminal tax defense.  Please contact our Newport Beach Office at 949-397-2292 for a consultation.

 wilsontaxlaw.com

Tax Problems Facing Marijuana Dispensaries, This Time From the City of Los Angeles

The LA times published an interesting article about marijuana dispensaries operating in Los Angeles.  The article focuses on the interesting fact that as Los Angeles tries to clamp down on the number of marijuana dispensaries operating in Los Angeles by making them follow Proposition D requirements, more than 450 medical marijuana shops filed business tax renewals with the Office of Finance.  This number is more than three times as many stores than what is estimated to be allowed to stay open.  So while local lawmakers are troubled by the number of medical marijuana shops that still exist in Los Angeles, the Office of Finance has no problem cashing in on all the taxes being collected from them.  The article states that Los Angeles collected roughly $2.1 million from medical marijuana tax renewals this year, an Office of Finance staffer told a City Council committee Monday.

The interesting thing about this article is that City Council is upset that these people are paying business taxes because now the City cannot use tax evasion statutes as a method to shut them down.   It seems to me that these people are trying to comply with the tax code so whether or not they comply with Proposition D is not the tax-collecting agencies' business.   The City is so upset at all the business tax renewals, but has no problem collecting the roughly $2.1 million in revenues from medical marijuana shops.  Nor should they have any problem with it - Council members would be forfeiting their jobs if they took the position that the illegal businesses should be issued refunds.

In reality, the juxtaposition between collecting taxes from someone while turning a blind eye to the source of the money is hardly a new story.  This happens every time the IRS comes in to count the drug money after the DEA makes a big bust.  Even illegal businesses have to pay taxes.  Nonetheless, you don't usually see the opposite scenario - e.g., the DEA swooping in after the IRS audits a tax return - as the City Council members seem to support here.   The sharing of tax information between taxing and law enforcement agencies is usually a one-way street.  In non-tax cases, the Federal tax privacy law, IRC Section 6103(i)(1), provides that the IRS can share return information with another federal investigative agency only with a court order.

The government relies on taxes to operate and it would inhibit people from filing true tax returns if they thought that the information would be made public or would be shared with other government agencies.  The privacy of tax return information was also a qualified privilege under Federal common law before Congress enacted Section 6103.  In this situation, it would behoove whoever is advocating and lobbying on behalf of the dispensaries to not only be familiar with the medical marijuana laws and business laws, but also tax law and policy.

As an attorney who understands criminal law and tax law, I can tell you that medical marijuana dispensaries get no breaks that other businesses get under the state tax code.  They are treated as illegal drug trafficking activities under the California Revenue and Taxation Code. So what does this mean? 

It means both the Feds and California will disallow all the business expenses of a marijuana dispensary that a normal business is entitled to deduct.  As a result, marijuana dispensaries will be taxed on their gross receipts for income tax purposes. California's tax code is basically "monkey see, monkey do," adopting the Federal tax code almost rule for rule.  Under Federal law, if a business violated public policy or is illegal, then it cannot take advantage of deductions or credits under the tax code.  Because federal tax law deems these activities as illegal drug trafficking activities, so does California.  These rules are completely screwed up because they encourage these types of businesses to operate under the radar for tax purposes.   Fortunately, it is not an entirely slam dunk case for the tax authorities because there are some legitimate tax "loopholes."  There are ways to operate so as to legitimately minimize these tax burdens.

Much of this is covered in a recent article I wrote on the Taxation Of Medical Marijuana Dispensaries.  I suggest any marijuana dispensary contact an experienced tax attorney who knows the marijuana dispensary tax rules inside and out.  There are ways to follow the tax rules and not have to pay taxes on the gross receipts of the dispensary.  Feel free to contact the Wilson Tax Law Group, if you have any questions. Our firm has significant experience addressing tax problems facing marijuana dispensaries.

Tax Problems Facing Marijuana Dispensaries, This Time From the City of Los Angeles

The LA times published an interesting article about marijuana dispensaries operating in Los Angeles.  The article focuses on the interesting fact that as Los Angeles tries to clamp down on the number of marijuana dispensaries operating in Los Angeles by making them follow Proposition D requirements, more than 450 medical marijuana shops filed business tax renewals with the Office of Finance.  This number is more than three times as many stores than what is estimated to be allowed to stay open.  So while local lawmakers are troubled by the number of medical marijuana shops that still exist in Los Angeles, the Office of Finance has no problem cashing in on all the taxes being collected from them.  The article states that Los Angeles collected roughly $2.1 million from medical marijuana tax renewals this year, an Office of Finance staffer told a City Council committee Monday.

The interesting thing about this article is that City Council is upset that these people are paying business taxes because now the City cannot use tax evasion statutes as a method to shut them down.   It seems to me that these people are trying to comply with the tax code so whether or not they comply with Proposition D is not the tax-collecting agencies' business.   The City is so upset at all the business tax renewals, but has no problem collecting the roughly $2.1 million in revenues from medical marijuana shops.  Nor should they have any problem with it - Council members would be forfeiting their jobs if they took the position that the illegal businesses should be issued refunds.

In reality, the juxtaposition between collecting taxes from someone while turning a blind eye to the source of the money is hardly a new story.  This happens every time the IRS comes in to count the drug money after the DEA makes a big bust.  Even illegal businesses have to pay taxes.  Nonetheless, you don't usually see the opposite scenario - e.g., the DEA swooping in after the IRS audits a tax return - as the City Council members seem to support here.   The sharing of tax information between taxing and law enforcement agencies is usually a one-way street.  In non-tax cases, the Federal tax privacy law, IRC Section 6103(i)(1), provides that the IRS can share return information with another federal investigative agency only with a court order.

The government relies on taxes to operate and it would inhibit people from filing true tax returns if they thought that the information would be made public or would be shared with other government agencies.  The privacy of tax return information was also a qualified privilege under Federal common law before Congress enacted Section 6103.  In this situation, it would behoove whoever is advocating and lobbying on behalf of the dispensaries to not only be familiar with the medical marijuana laws and business laws, but also tax law and policy.

As an attorney who understands criminal law and tax law, I can tell you that medical marijuana dispensaries get no breaks that other businesses get under the state tax code.  They are treated as illegal drug trafficking activities under the California Revenue and Taxation Code. So what does this mean? 

It means both the Feds and California will disallow all the business expenses of a marijuana dispensary that a normal business is entitled to deduct.  As a result, marijuana dispensaries will be taxed on their gross receipts for income tax purposes. California's tax code is basically "monkey see, monkey do," adopting the Federal tax code almost rule for rule.  Under Federal law, if a business violated public policy or is illegal, then it cannot take advantage of deductions or credits under the tax code.  Because federal tax law deems these activities as illegal drug trafficking activities, so does California.  These rules are completely screwed up because they encourage these types of businesses to operate under the radar for tax purposes.   Fortunately, it is not an entirely slam dunk case for the tax authorities because there are some legitimate tax "loopholes."  There are ways to operate so as to legitimately minimize these tax burdens.

Much of this is covered in a recent article I wrote on the Taxation Of Medical Marijuana Dispensaries.  I suggest any marijuana dispensary contact an experienced tax attorney who knows the marijuana dispensary tax rules inside and out.  There are ways to follow the tax rules and not have to pay taxes on the gross receipts of the dispensary.  Feel free to contact the Wilson Tax Law Group, if you have any questions. Our firm has significant experience addressing tax problems facing marijuana dispensaries.

IRS "Adopts" Taxpayer Bill of Rights, Except No Actual Taxpayer Rights Adopted

The IRS issued a press releases this week, which can be found here, alerting taxpayers to the newly adopted Taxpayer Bill of Rights, which are outlined here.  Except there are no new rights and nothing can be "adopted" when it is a list of responsibilities and rights already belonging to the IRS and taxpayers.  Imagine if McDonald's put a customer "Bill of Rights" on their menu, which said that, when you pay for a hamburger, we'll give you a hamburger, except when we don't, in which case you can complain to your cashier and then to the manager to see if they care.  The IRS's Taxpayer Bill of Rights, included in Publication 1, which presumably will be sent to taxpayers during audits, provides the following:

The Right to Be Informed

The Right to Quality Service

The Right to Pay No More than the Correct Amount of Tax

The Right to Challenge the IRS’s Position and Be Heard

The Right to Appeal an IRS Decision in an Independent Forum

The Right to Finality

The Right to Privacy

The Right to Confidentiality

The Right to Retain Representation

The Right to a Fair and Just Tax System

The problem with this list of rights isn't just that they don't (and can't, as a matter of law) provide additional, substantive, judicially-enforceable rights to taxpayers than can be found in statutes, regulations, and case law.  Even outside of a court of law, parallel changes to the IRS's Internal Revenue Manual would be needed adding more responsibilities to IRS employees for this list to have any teeth when a taxpayer fights against the IRS. Without the force of law or a substantive change in internal IRS procedures, they are little more than PR Buzz.  It is as though they were trying to put a positive spin on something that intuitively sounds unpleasant.  I imaging the process went something like this:

     IRS Commissioner, to PR Guy: I want to make sure the taxpayers know that the IRS can collect every penny you owe in taxes, including interest and penalties, every cent of it! 

     PR Guy:  But that sounds pretty negative.  It won't come off well for us...

    IRS Commissioner:  How about, "The good news is the IRS can't collect more than you owe."

     PR Guy:  I don't know.  I think taxpayers will see right through it.

     IRS Commissioner:  Make it happen!

Even if that weren't the exchange, we still somehow ended up with "The Right to Pay No More than the Correct Amount of Tax."

According to the IRS, this means "Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly."  That sounds great!  But, what is "the amount of tax legally due?"  Under the law, when the IRS assesses a tax, that becomes tax legally due.  That amount grows with interest and penalties, and you have to pay those, too, because they are also legally due. Then, what does it mean to "apply all tax payments properly?"  Under well-established law, unless you specifically direct a tax payment you make to a specific tax year, the IRS can properly apply that payment to any of your tax liabilities for any year as the IRS sees fit.  So, this "right" amounts to this: "The IRS can collect all the taxes, penalties, and interest you owe until they are fully paid, and the IRS will apply your payments to your taxes, but will do so in a manner fits its own best interest in most cases."

Ultimately, there should be one item in the Taxpayer Bill of Rights, bolded for emphasis: You have the right to not blindly trust the IRS to act in your best interest.  Put that on a poster and slap it on the IRS walls.

Form more, visit Wilsontaxlaw.com, the best Newport Beach tax attorney.

IRS "Adopts" Taxpayer Bill of Rights, Except No Actual Taxpayer Rights Adopted

The IRS issued a press releases this week, which can be found here, alerting taxpayers to the newly adopted Taxpayer Bill of Rights, which are outlined here.  Except there are no new rights and nothing can be "adopted" when it is a list of responsibilities and rights already belonging to the IRS and taxpayers.  Imagine if McDonald's put a customer "Bill of Rights" on their menu, which said that, when you pay for a hamburger, we'll give you a hamburger, except when we don't, in which case you can complain to your cashier and then to the manager to see if they care.  The IRS's Taxpayer Bill of Rights, included in Publication 1, which presumably will be sent to taxpayers during audits, provides the following:

The Right to Be Informed

The Right to Quality Service

The Right to Pay No More than the Correct Amount of Tax

The Right to Challenge the IRS’s Position and Be Heard

The Right to Appeal an IRS Decision in an Independent Forum

The Right to Finality

The Right to Privacy

The Right to Confidentiality

The Right to Retain Representation

The Right to a Fair and Just Tax System

The problem with this list of rights isn't just that they don't (and can't, as a matter of law) provide additional, substantive, judicially-enforceable rights to taxpayers than can be found in statutes, regulations, and case law.  Even outside of a court of law, parallel changes to the IRS's Internal Revenue Manual would be needed adding more responsibilities to IRS employees for this list to have any teeth when a taxpayer fights against the IRS. Without the force of law or a substantive change in internal IRS procedures, they are little more than PR Buzz.  It is as though they were trying to put a positive spin on something that intuitively sounds unpleasant.  I imaging the process went something like this:

     IRS Commissioner, to PR Guy: I want to make sure the taxpayers know that the IRS can collect every penny you owe in taxes, including interest and penalties, every cent of it! 

     PR Guy:  But that sounds pretty negative.  It won't come off well for us...

    IRS Commissioner:  How about, "The good news is the IRS can't collect more than you owe."

     PR Guy:  I don't know.  I think taxpayers will see right through it.

     IRS Commissioner:  Make it happen!

Even if that weren't the exchange, we still somehow ended up with "The Right to Pay No More than the Correct Amount of Tax."

According to the IRS, this means "Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly."  That sounds great!  But, what is "the amount of tax legally due?"  Under the law, when the IRS assesses a tax, that becomes tax legally due.  That amount grows with interest and penalties, and you have to pay those, too, because they are also legally due. Then, what does it mean to "apply all tax payments properly?"  Under well-established law, unless you specifically direct a tax payment you make to a specific tax year, the IRS can properly apply that payment to any of your tax liabilities for any year as the IRS sees fit.  So, this "right" amounts to this: "The IRS can collect all the taxes, penalties, and interest you owe until they are fully paid, and the IRS will apply your payments to your taxes, but will do so in a manner fits its own best interest in most cases."

Ultimately, there should be one item in the Taxpayer Bill of Rights, bolded for emphasis: You have the right to not blindly trust the IRS to act in your best interest.  Put that on a poster and slap it on the IRS walls.

Form more, visit Wilsontaxlaw.com, the best Newport Beach tax attorney.

Welcome to the Wilson Tax Law Blog - a Newport Beach Tax Attorney Blog

The Wilson Tax Law Group is a tax firm serving the Newport Beach and Yorba Linda areas.  This blog is meant to be both a service to our clients, where we can post IRS, California Franchise Tax Board, FBAR, and Orange County property tax news that may be of interest to them.  It will also be a place where we will post on topics that are of interest to us and other tax professionals following hot tax topics of the moment.  Sometimes, those areas will intersect, because we handle cutting edge cases including tax audits and tax planning for marijuana dispensaries (sales tax and income tax) and defending taxpayers in criminal investigations of the FBAR penalties.  This blog will be constantly evolving, so please give us feedback in the comments section if you think of future topics you would like to read more about.

For more information on our firm, read about our Newport Beach and Yorba Linda area tax attorney at wilsontaxlaw.com.

Welcome to the Wilson Tax Law Blog - a Newport Beach Tax Attorney Blog

The Wilson Tax Law Group is a tax firm serving the Newport Beach and Yorba Linda areas.  This blog is meant to be both a service to our clients, where we can post IRS, California Franchise Tax Board, FBAR, and Orange County property tax news that may be of interest to them.  It will also be a place where we will post on topics that are of interest to us and other tax professionals following hot tax topics of the moment.  Sometimes, those areas will intersect, because we handle cutting edge cases including tax audits and tax planning for marijuana dispensaries (sales tax and income tax) and defending taxpayers in criminal investigations of the FBAR penalties.  This blog will be constantly evolving, so please give us feedback in the comments section if you think of future topics you would like to read more about.

For more information on our firm, read about our Newport Beach and Yorba Linda area tax attorney at wilsontaxlaw.com.