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Focus on Tax Controversy and Litigation - The Unprecedented Extraterritorialization of Tax Crimes

In addition to the discussion of the recently proposed U.K. criminal tax legislation, this month’s issue features articles regarding the Tenth Circuit Court decision in McNeill v. United States discussing a managing partner’s...more

IRS and DOJ are Reviewing and Scrubbing Offshore Accounts Data to Build Civil and Criminal Cases

During the June 24, 2016 Tax Controversy Conference held at New York University, officials from both the Department of Justice (DOJ) and the Internal Revenue Service (IRS) emphasized their focus on analyzing the avalanche of...more

Tax Day Brings Barrage of Criminal Tax Charges and Warnings

With “Tax Day” upon us, the Justice Department’s Tax Division and U.S. Attorney’s Offices around the country have unleashed an avalanche of press releases warning would-be tax cheats of the severe criminal and civil...more

With April 18 Just Days Away, DOJ’s Tax Division Warns Would-Be Tax Cheats

With “Tax Day” fast approaching, the Justice Department’s Tax Division has issued a stern warning of its own to taxpayers thinking of cheating on their taxes. In a press release entitled “Justice Department Reminds Taxpayers...more

Retroactive Tax Law Provides Tax Benefits for Victims of Wrongful Incarceration

At the end of 2015, Congress eliminated some of the uncertainty regarding the tax treatment of damages for wrongful imprisonment. Newly enacted Internal Revenue Code section 139F provides that gross income does not include...more

CPA-Client Privilege Doesn't Extend to Criminal Proceedings

It's Monday morning and your client, who recently retained you for estate tax planning advice, informs you that the IRS is auditing her income tax returns from the past three years. In reviewing her tax returns and financial...more

Warning, Offshore Accounts Holders May Have No Fifth Amendment Protections

In what is becoming an increasingly used attack vehicle, the Department of Justice (DoJ) is using the "required records doctrine" to compel taxpayer's to produce what may be incriminating evidence of ownership or control of...more

How the Rise in Undercover Investigations is Changing the Law

Jan. 19, 2015 (Mimesis Law) -- Robert Blecker, professor of law at New York Law, talks with Lee Pacchia about the dramatic rise in undercover investigations and their effect on the legal defense of entrapment....more

North Carolina ABC Legislative Wrap-Up 2014

The 2014 legislative short session adjourned on August 20, 2014. The General Assembly passed several bills affecting alcoholic beverages in North Carolina. Significant provisions of those bills are summarized below.more

Part VI – Willful Or Non-Willful Offshore Omissions & Conclusion

Below is Part 6 and the conclusion of my partner, Rick Josepher’s, analysis of the new offshore enforcement environment in light of the new 2014 Offshore Voluntary Disclosure Procedures.more

Focus on Tax Controversy and Litigation - July 2014

In this issue: - Supreme Court Limits Taxpayer’s Ability to Examine the IRS at a Summons Enforcement Hearing - Court Determines Tax Analysis not Protected by Attorney-Client Privilege and Work Product Doctrine - Streamlined OVDP Expanded to Resident US Taxpayers - OECD Moves Forward on BEPS Action Plan - IRS Issues New Circular 230 Regulations - Former Jenkens & Gilchrist Partner Paul Daugerdas sentenced to 15 years in Prison - Excerpt from Supreme Court Limits Taxpayer’s Ability to Examine the IRS at a Summons Enforcement Hearing: On June 19, 2014, the United States Supreme Court held that a taxpayer has a right to examine IRS officials regarding their purpose of issuing a summons.1 However, in reversing and vacating an Eleventh Circuit’s decision, the Supreme Court did not recognize a taxpayer’s right to a formal hearing based on unsupported allegations that the summons was issued in bad faith. The Supreme Court found that the Eleventh Circuit erred in ruling that a bare allegation of improper purpose was sufficient to question IRS officials and remanded the case to the circuit court for further consideration in light of the Supreme Court’s decision. Please see full newsletter below for more information. more

Can an OVDP Participant Set Aside a Closing Agreement on the Theory of Duress?

It has been just over five years since the Internal Revenue Service (“IRS”) offered the first of three offshore voluntary disclosure programs for individuals with undisclosed foreign financial accounts. Since the announcement of the first offshore voluntary disclosure program, the IRS has threatened severe criminal and civil penalties against U.S. taxpayers with undisclosed foreign financial accounts. more

Court’s Ruling Holding Corporate Officer Responsible for Trust Fund Recovery Penalty Illustrates Risk of Personal Liability for Unpaid Employment Taxes

A district court in the Northern District of California has held that the officer of a now-defunct corporation is personally responsible for the Trust Fund Recovery Penalty based upon the company’s failure to collect, account for, and pay over federal withholding taxes. See United States v. Guerin, 113 AFTR 2d 2014 (N.D. Cal. April 28, 2014). more

McIntyre: Not What You Bargained For?

When are the parties to a civil tax dispute bound by agreed facts from a criminal proceeding? This was the question considered by the Tax Court of Canada on a Rule 58 motion made by the taxpayers in McIntrye et al v. The Queen (2014 TCC 111). Specifically, the taxpayers argued the principles of issue estoppel, res judicata, and abuse of process applied to prevent the Minister of National Revenue (the “Minister”) from assuming facts inconsistent with agreed facts from a prior criminal guilty plea.more

District Court Rules for Taxpayer in STARS Case Santander Holdings; Court of Federal Claims Rules for Government in STARS Case Salem Financial

In this issue: - Swiss Bank Settlement Dilemma - District Court Upholds STARS Transaction Ruling Payment Is Included in Pre-Tax Profit - Court of Federal Claims Holds for Government in BB&T STARS Transaction - Tax Court Allows Interest Deduction for Loan Connected with STARS Transaction - Supreme Court Hears Oral Arguments in United States v. Woods - Swiss Bank Frey Ceases - Excerpt from: District Court Upholds STARS Transaction Ruling Payment Is Included in Pre-Tax Profit: On October 17, 2013, Judge George A. O’Toole of the US District Court of Massachusetts issued an opinion holding that a structured trust advantaged repackaged securities (“STARS”) transaction entered into by Sovereign Bancorp, Inc. (now known as Santander Holdings USA, Inc.) (“Sovereign”) was not a sham, but rather had objective economic substance as a result of a payment Sovereign received from the counterparty which was included in Sovereign’s pre-tax profit. 3 The opinion was consistent with the remarks of the district court judge in a September 25, 2013 pretrial conference when ruling that Sovereign’s motion for partial summary judgment would be granted. The ruling marks a significant taxpayer victory in the so-called “foreign tax credit generator” cases. Please see full newsletter below for more information.more

Congressional Investigations: Unique And Significant Risks

We have all watched the familiar scene on Capitol Hill – the latest public scandal like officials from the Internal Revenue Service are dragged up to Capitol Hill to appear before a Committee, raise their right hands, take the oath and then assert their Fifth Amendment right against self-incrimination. more

Search Warrants - Is it a rubber stamping process ?

A - and- Her Majesty's Revenue & Customs ("HMRC") : Challenge, the lawfulness of a search warrant issued by HMRC in the HIGH COURT OF JUSTICE - Some clarification on this point has been provided in a recent case in which we acted on behalf of the Claimant. In this case a number of warrants were issued by the court allowing HMRC to search a number of premises and for a wide range of material. One warrant related to our client. The warrant contained some information as to what HMRC were entitled to seize but did not on its face explain what the business under investigation was, who the suspects were, what the investigation concerned or quite what documents were being sought; other than for example “banking records relevant to the offence under investigation”. We brought a claim for judicial review and were granted permission to challenge the warrant. The court rejected the argument deployed by HMRC that the warrant could be remedied by reliance upon information provided to the Magistrates, information given to the officers in a briefing before the search, and explanations provided to the suspect at the scene. The court disapproved the reasoning in Fitzpatrick and endorsed our interpretation of the law that the warrant itself must explain both to those executing it and the occupants what is within and outside its terms. The court also expressed concern that HMRC had made no notes of what was said at the ex parte hearing and that no reasons were given or recorded by the Magistrates. The warrant was declared to be unlawful and quashed, costs were awarded to the Claimant. HMRC had agreed to return the originals shortly before the hearing. It is clear following this judicial review that those who apply for and issue warrants in future must set out what they are entitled to seize within the warrant so both the suspect and those executing the warrant can understand from the document itself what can and cannot be taken. It is also now clear that even in cases smaller and more straightforward than (for example) Tchenguiz, a proper note of what is said at the ex parte hearing must be kept and reasons noted by the issuing court. Failure to comply with the safeguards under section 15 will lead to warrants being quashed and in an appropriate case the return of the material and or damages and costs. Monty Jivarj of Jeffrey Green Russell Solicitors acted for the Claimant instructing Helen Malcolm QC and Matthew Butt of 3 Raymond Buildings. more

From the intrusive to the abusive – what happens when the CRA goes too far?

In order to administer and enforce the self-reporting system of tax assessment in Canada, the Income Tax Act (ITA) and Excise Tax Act (ETA) provide the CRA with the power to demand certain information from taxpayers. Generally, this information is collected for the purposes of auditing a taxpayer, but may also be obtained where no audit is conducted. For example, the CRA may access such information for the purpose of evaluating whether record-keeping requirements have been complied with. Higher statutory thresholds are imposed on the CRA – such as requiring a search warrant issued by a judge – where the information sought would not normally be required for an audit.more

Is the Tax Adviser Privilege a Trap for the Unwary?

As we approach April 15th many taxpayers will meet with professional tax advisers and some may be under the impression that communications between a taxpayer and a tax adviser are privileged. This assumption is wrong as demonstrated by a case now on appeal from the Ninth Circuit to the U.S. Supreme Court (Edwards v. The United States of America). In Edwards a taxpayer believed that his communications with his non-attorney tax adviser was a protected communication and that his tax adviser could not be compelled to testify against him. The trial court and the Ninth Circuit Court of Appeals found that the privilege protecting communications was subject to two important limitations which limit the privilege to NON-CRIMINAL matters or proceedings. Is spite of Edward’s objection the trial court and appellate court found that the privilege did not apply and Edward’s tax adviser was called before the grand jury and gave testimony against him based upon communications that Edwards made or provided to the tax adviser. Partly as a result of the tax adviser’s testimony, Edwards was charged criminally as a result of an indictment issued by a federal grand jury. Edwards pled guilty to a single count of a five count indictment and was sentenced to twenty-one months, which was stayed pending his appeal to the United States Supreme Court. In his petition to the Supreme Court Edwards asserts that the government has created a “trap for the unwary” by limiting the non-attorney tax adviser communication privilege to what amount to only non-criminal matters. The odds of the Supreme Court granting a hearing on the case are very slim, so it certainly worth considering the lesson from Edwards. Please see full article below for more information. more

Professional Ethics In A Tax World – Self-Assessment, Self-Incrimination, The Charter, Crown Fairness And Other Matters

TABLE OF CONTENTS 1.0 INTRODUCTION .... 1 2.0 KEY PRINCIPLES .... 3 2.1 “Voluntary” Self-Assessment .... 3 2.2 The Nature of Tax Penalties .... 4 2.3 Right Against Self-Incrimination .... 5 2.4 Unjust Enrichment .... 10 3.0 PROFESSIONAL ETHICS .... 10 3.1 Lawyers .... 10 Generally .... 10 To the Client .... 12 To the State, the Legal Profession and Oneself.... 13 To the Courts and Tribunals .... 14 Crown Counsel .... 14 3.2 Accountants .... 16 4.0 SIX ILLUSTRATIVE .... 17 FMC Partner Gordon Funt along with Chuck Burkett, C.A., Professor David Duff and Craig Sturrock, Q.C. presented "Professional Ethics in a Tax World - Self-Assessment, Self-Incrimination, The Charter, Crown Fairness and Other Matters" at the B.C. Tax Conference. Please see full Publication below for more information.more

Mofo New York Tax Insights - March 2011 - Volume 2, Issue 3

In this issue: Taxpayer’s Testimony Fails to Establish Non-Residency; New Unit in A.G.’s Office to Pursue Tax Claims Under False Claims Act; ALJ Vacates Demand for Bill of Particulars; Non-Profit’s 99-Year Lease Insufficient for Property Tax Exemption; Budget Bill Would Reduce Dormancy Periods for Unclaimed Property; and Insights in Brief. Excerpt from "Taxpayer’s Testimony...": In yet another reminder of the hurdles that individuals face in New York statutory residency audits, a New York State administrative law judge has held that a Connecticut domiciliary with an apartment in New York City, who worked in Manhattan, failed to prove that he was not present in New York City for more than 183 days, and was therefore a New York State and City statutory resident. Matter of Thomas P. and Kathleen H. Puccio, DTA No. 822476 (N.Y.S. Div. of Tax App., Jan. 27, 2011). The petitioner and his wife were domiciled in Weston, Connecticut. They also owned a cooperative apartment in Manhattan. The petitioner worked as a lawyer in Manhattan. For the 2003 tax year, he filed a New York State non-resident return reporting that he was present in New York State for 115 days, and paying New York State tax on his New York source income (there is no New York City tax on nonresident individuals). The Department audited the return and concluded that he was a statutory resident of both New York State and City. Please see full publication below for more information.more

FBAR Penalty Relief

In U.S. v. Williams decided 9/01/2010, the U.S. District Court in the Eastern Dist of Virginia entered a decision in favor of the taxpayer rejecting the governments assertion of willfulness and finding in favor of the taxpayer who failed to file timely Foreign Bank Account Reports, FBAR’s (Form TD 90-22.1). The case was one of “first impression” which means that the court found no appropriate legal standard to apply. Why would that be so? There are several issues that this case addressed. First, the criminal tax issues. The taxpayer pled to criminal conspiracy criminal tax evasion for establishing and maintaining two offshore bank accounts into which he deposited over $7,000,000 and earned over $800,000 for the years in question. Second, as part of the plea he filed amended income tax returns (Form 1040X) and was required to file previously unfiled FBAR’s. Subsequently, FBAR penalties were assessed. The procedural issues in this case are interesting. The court found that the procedure to contest an FABR penalty was unclear. The penalty itself is authorized under 31 U.S.C.§5321(b)(i) but the legal standard of review is not. The process of FBAR penalty assessment involves a Revenue Agent issuing a Notice of Proposed Assessment to the taxpayer. The taxpayer then disagrees with the proposed assessment and the U.S. then files an action in the U.S. District Court where the taxpayer resides to enforce collection. Please see full article below for more information.more

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