Wednesday, October 31, 2012

Procedures for Withdrawals and Releases of Notices of Federal Tax Lien Were Not Always Followed

The Internal Revenue Service agrees that releases and withdrawals of lien notices were not always processed timely or properly and has committed to making changes to procedures, the Treasury Inspector General for Tax Administration said in a report released Aug. 22, 2012. 

When taxpayers neglect or refuse to pay their taxes, IRS can file notices of federal tax liens with local government offices to protect the federal government's right of priority against certain third parties, such as purchasers or creditors.
The IRS policy changes and outreach efforts have resulted in significant increases in the number of lien withdrawals requested by taxpayers. Withdrawal delays, the agency watchdog said, can cause unnecessary burdens on taxpayers while untimely releases could violate taxpayers' rights.

The Internal Revenue Service (IRS) attempts to collect Federal taxes due from taxpayers by sending letters, making telephone calls, and meeting face-to-face with taxpayers. A claim, commonly referred to as a Federal Tax Lien, attaches automatically to a taxpayer’s assets for the amount of unpaid tax when the taxpayer neglects or refuses to pay.  

The IRS files a Notice of Federal Tax Lien (NFTL) in appropriate local government offices to protect the Federal Government’s right of priority against certain third parties, typically purchasers or creditors.

The IRS can file an NFTL on the taxpayer’s property for one or multiple tax periods that contain an outstanding tax liability. The IRS also has the statutory authority to re-file the notice to continue protecting the Federal Government’s priority interest, when applicable.

In addition, the IRS is required to release the NFTL to protect the taxpayer’s rights after the taxpayer meets various conditions. In some cases, the IRS may withdraw the NFTL, such as when it is filed in error.

If the IRS determines not to re-file the NFTL, a self-releasing provision6 will extinguish the notice 30 calendar days after the original Collection Statute Expiration Date. If the IRS determines that re-filing is necessary, the Centralized Lien Processing Operation (CLP) will input and process the NFTL re-file through the Automated Lien System (ALS).

The Internal Revenue Code (I.R.C.) authorizes the IRS to withdraw an NFTL when certain conditions have been met. For example, a withdrawal may be issued when it is in the best interest of the Federal Government and the taxpayer or will facilitate collection of the tax liability. Withdrawal of the NFTL removes the public notice of the lien; it does not extinguish any remaining underlying liability, nor does it prevent the IRS from collecting any unsatisfied tax liabilities.

Taxpayers and IRS employees request NFTL withdrawals through the Small Business/ Self-Employed (SB/SE) Division’s Advisory function or Insolvency function because these two functions have the authority to approve withdrawals.  If approved, the CLP processes and prints the withdrawal certificates (Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien) and sends it to the proper recording office. NFTL releases The IRS has legal and internal policy requirements to release the NFTL within 30 calendar days of the date that the tax liability is fully satisfied, the liability becomes legally unenforceable,  or the Secretary of the Treasury has accepted a bond for the assessed tax. The release of an NFTL is generally systemically generated after all the tax periods on an NFTL are satisfied; however, in some cases, the IRS should request a manual release. The taxpayer may also request a manual release in situations that warrant expedited processing or request an immediate release which can be prepared upon the receipt of certified funds. The CLP prints Form 668(Z), Certificate of Release of Federal Tax Lien, and mails it to the proper recording office.

In some circumstances, such as an immediate release, revenue officers and Taxpayer Assistance Center employees may issue the release certificate directly to the taxpayer upon receipt of certified funds. The taxpayer can then personally file the certificate with the recording office.

The Government Accountability Office reported that, despite actions taken to improve its NFTL release process, the IRS was not consistently releasing NFTLs timely, as required by the I.R.C. The Government Accountability Office estimated that in Fiscal Year (FY) 2009, 14 percent of the NFTLs were not released timely due to processing errors and delays.

Have  an IRS TAX LIEN?  Want to get it RELEASED? Contact the Tax Lawyers at
Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).

Payments to Former Owner Not Disguised Purchase Price Payments

Payments to the former owner of an insurance brokerage business were not disguised purchase price payments, the U.S. Tax Court held Oct. 15 (H&M Inc. v.Commissioner, T.C., No. 16612-09, T.C. Memo. 2012-290, 10/15/12).  

The owner of H&M Inc., a small corporation, sold its insurance brokerage business to a bank, then went to work for the bank, which paid wages to H&M Inc. and interest payments to Harold Schmeets.

Holmes said both parties were “genuinely interested in creating an employment relationship and were not just massaging the paperwork for its tax consequences.”  There was virtually no discussion about the tax consequences of the transaction and the parties treated the transaction as an asset sale and employment relationship. 

The Court found that the payments Schmeets received under the employment and salary-deferment agreements were not disguised purchase-price payments to H & M. H & M is therefore not liable for the section 6662(a) penalty on this issue.  

If you have Tax Problem, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).

Another Whistleblower Gets Millions for Exposing Tax Avoidance Schemes

A tax whistleblower received a $2 million reward from the Internal Revenue Service for his role uncovering an alleged multimillion-dollar tax-avoidance scheme attempted by Illinois Tool Works Inc in the late 1990s.

The informant is a Wall Street banker who remained anonymous to protect his career.

Last year, the IRS Whistleblower Office awarded him $1.1 million for information about abusive tax shelters allegedly set up by Wall Street banks to help Enron evade taxes on more than $600 million of taxable income. The individual testified about the IRS whistleblower program in 2004 as a confidential witness, known as “Mr. ABC,” before the Senate Finance Committee.

Most tax-whistleblower cases take between 5 - 7 years to be resolved, in part because whistleblowers aren't paid until after the IRS is paid and the taxpayer's time to appeal has expired.

If you want to be a Wistle Blower or are Victum of a Wistle Blower, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).


Less than Half of the Estates Owe Tax In 2011

Since 2001, the filing threshold has gradually increased from $675,000 for 2001 deaths to $3.5 million for 2009 deaths.

The estate tax was temporarily repealed for 2010 deaths, but was later reinstated on a retroactive basis with a $5.0 million exemption level and a top marginal tax rate of 35 percent. This exemption level and top marginal rate will stay in effect for the estates of 2011 decedents.

Higlights of the Data
• Due primarily to increases in the filing threshold, the number of estate tax returns filed decreased from more than108,000 in 2001 to just over 15,000 in 2010.

• For Filing Year 2010, estates with gross assets above the filing threshold reported over $130 billion in assets.

• Almost 61 percent of 2010 estate tax decedents were male. Just over half of all decedents were married, while another 36 percent were widowed. Only 13 percent of decedents were single, divorced, or separated.

• Over 97 percent of the estates of married decedents, and 48 percent of estates overall, reported deductions for marital bequests, for a total of $42 billion. Only 9 percent of estates with a marital bequest owed estate tax.

• About 20 percent of estates claimed a charitable bequest deduction, for a total of $11.5 billion. Estates with $20 million or more in gross estate accounted for over 63 percent of this total, despite representing only 6 percent of filers.

• After accounting for marital and charitable bequests, as well expenses and debts of the estate, less than half of the estates filing in 2010 owed estate tax. The combined estate tax obligation of these estates was over $13 billion.
Have and Estate Tax Question?  Contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).


Reverse like Kind Exchange Approved where Two Related Parties Used the Same Swap Facilitator

In PLR 201242003, the IRS permitted tax deferral under Section 1031 even though the Exchange Accommodation Titleholder entered into Qualified Exchange Accommodation Arrangements with more than one entity, including entities related to the taxpayer, who both had a bona fide intent to utilize a reverse exchange format to defer capital gain taxes.
PLR 20122003 notes that Rev. Proc. 2000-37 does not prohibit an Exchange Accommodation Titleholder (EAT) from functioning as an such to more than one taxpayer under multiple Qualified Exchange Accommodation Arrangements (QEAA) for the same parked exchange property.
Under Code Sec. 1031, gain or loss isn't recognized currently on the exchange of property held for productive use in a trade or business or for investment for property of like kind that will be held for productive use in a trade or business or for investment. The replacement property must be identified within 45 days after the date that the property given up in the exchange is relinquished. Additionally, the taxpayer must actually receive the replacement property no later than (a) 180 days after the date that the property given up in the exchange is relinquished, or (b) the due date (with regard to extensions) for the taxpayer's return for the year in which the relinquished property is given up, whichever is earlier. (Code Sec. 1031(a)(3))

When a two-way (or direct) exchange of like-kind property isn't possible, the solution often is a multiparty deferred exchange. In a regular deferred exchange, Seller gives up his property first. Often, however, the replacement property must be received first, before Seller has transferred his property. In this situation, the transaction is structured as a reverse multiparty like-kind exchange.

In Rev Proc 2000-37, 2000-2 CB 308, IRS said it wouldn't challenge the qualification of property as either replacement or relinquished property, or the treatment of the exchange accommodation titleholder as the beneficial owner of either type of property, if the property is held in a “qualified exchange accommodation arrangement.”

Property is held in a QEAA if all the following requirements are met:

  1. Qualified indicia of ownership (QIO) of the property are held by the EAT from the date of acquisition by the EAT until the property is transferred to the taxpayer as replacement property or to someone other than the taxpayer or a disqualified person as relinquished property. Among other conditions, the EAT can't be the taxpayer or a disqualified person under Reg. § 1.1031(k)-1(k)). QIO means legal title, other indicia of ownership treated as beneficial ownership of the property under applicable principles of commercial law (e.g., a contract for deed), or interests in an entity that is disregarded as an entity separate from its owner for tax purposes (e.g., a single member limited liability company) and that holds either legal title to the property or such other indicia of ownership.
  2. When the QIO of the property is transferred to the EAT, it is the taxpayer's bona fide intent that the property represent either replacement property or relinquished property in an exchange intended to qualify for Code Sec. 1031 treatment.
  3. No later than five business days after QIO of the property are transferred to the EAT, the taxpayer and the EAT enter into a written QEAA providing that: (a) the EAT is holding the property for the benefit of the taxpayer to facilitate an exchange under Code Sec. 1031 and Rev Proc 2000-37; (b) both parties agree to report the acquisition, holding, and disposition of the property as provided in Rev Proc 2000-37; and (c) the EAT will be treated as the beneficial owner of the property for all federal income tax purposes. Both parties must report the federal income tax attributes of the property on their federal returns in a manner consistent with this agreement.
  4. No later than 45 days after the transfer of QIO of the replacement property to the EAT, the relinquished property is properly identified in a way consistent with the identification requirements in Reg. § 1.1031(k)-1(c). The taxpayer may properly identify alternative and multiple properties under the rules of Reg. § 1.1031(k)-1(c)(4).
  5. No later than 180 days after the transfer of QIO of the property to the EAT, (a) the property is transferred (either directly or indirectly) through a qualified intermediary (as defined in Reg. § 1.1031(k)-1(g)(4)) to the taxpayer as replacement property; or (b) the property is transferred to a person who is not the taxpayer or a disqualified person as relinquished property.
  6. The combined time period that the relinquished property and the replacement property are held in a QEAA does not exceed 180 days.

The PLR concludes that may enter into QEAAs with more than one entity, including persons related to Taxpayer, each of which has a bona fide intent to acquire the same property as the replacement property for their respective exchanges. Rev Proc 2000-37 , does not prohibit an accommodation party from serving as an EAT to multiple taxpayers under multiple and simultaneous QEAAs for the same parked property. The fact that Related Party's QEAA failed because Taxpayer timely acquired Property under its QEAA using the same EAT does not invalidate Taxpayer's QEAA.
Have a Tax Question?  Contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).


Tuesday, October 30, 2012

Russian Banks Soon Subject to U.S. Monitoring.

Russia's presidential executive office has been reviewing the U.S. anti-money laundering act known as FATCA (Foreign Account Tax Compliance Act). Presidential economic advisor Elvira Nabiullina spearheaded a meeting with Finance Ministry, Foreign Ministry, Central Bank, Federal Financial Markets Service, Tax Service and National Payment Council officials, issuing instructions to prepare final proposals within the next two weeks on Russia's negotiating position regarding accession to FATCA, which is expected to come into effect on January 1, 2013. 

Fearing that Russian banks might sustain financial or goodwill damage, the National Payment Council addressed a letter to Russia's Prime Minister Dmitry Medvedev in June 2012 and requested that he begin developing the FATCA compliance mechanism for Russia. At the meeting initiated by Nabiullina, which came in response to the letter, the council came up with five options for Russia's participation in FATCA.

The first option envisages an intergovernmental agreement between Russia and the United States, under which Russian banks will enter into separate agreements with the IRS and disclose information on U.S. taxpayers directly but in a manner prescribed by national laws. This model has been adopted in Switzerland and Japan. According to National Payment Council President Andrei Yemelin, in view of the tight timeframe, this is the best option, though it is fraught with the risk of violating bank privacy laws.

The second possible model also rests on an intergovernmental agreement that would, unlike the previous option, lay the groundwork for centralized disclosure (this model has been implemented in France, Great Britain, Germany, Italy, Spain and the Netherlands). If the model is adopted, banks will be required to submit all relevant information about U.S. taxpayers to the national regulator, which will then pass it on to the IRS. In return, the United States pledges to disclose to its partner nations information about accounts opened with U.S. financial organizations by their relevant taxpaying residents. 

The third option, strictly in line with U.S. law, also suggests direct agreements between Russian banks and the IRS, but is even harder on the banks. Aside from reporting to the U.S. tax authorities, the banks would be under obligation to deduct a 30-percent tax from or even close the accounts of those refusing to cooperate with the IRS. Yemelin noted that such a scenario, alongside the danger of breaching bank privacy laws, involves potentially problematic direct debit withdrawals for the benefit of a foreign government.

According to Yemelin, to implement any of the three options, additional national laws must be adopted. The procedure must also be mapped out by October 1, 2012, to followed by an intergovernmental agreement with the U.S. that must be entered into by January 1, 2013. In addition, banks need to be advised promptly of the particular compliance mechanism selected, to prevent them from entering into individual agreements with the IRS.

Any Russian federal law regulating FATCA compliance must be based on an intergovernmental agreement with the United States that is in line with the double tax treaty, Yemelin explained. Meanwhile, the government has not yet selected an exact scenario. Although the process of developing a FATCA participation mechanism has been launched, it is proceeding slowly.

"The most favorable and comfortable scenario for Russia would be to combine options", said Konstantin Trapaidze, Chairman of the Bar Association Vash Yuridichesky Poverenny. "First, we have to go with the model used by Switzerland and Japan ‒ individual agreements ‒ and work by this scheme until an intergovernmental agreement between Russia and the United States is reached on centralized transfer of information. Otherwise, the given initiative, which is so far feeble and unauthorized, will take on an unbalanced character, damaging Russian banks most of all," Trapaidze said. Meanwhile, the banks will have to bear the brunt of the accession anyway, head of financial monitoring at SMP Bank Inga Tumasyeva said: "Either way, the banks will incur material costs involved in implementing the changes. They have no choice, though, since they will otherwise become outcasts: compliance with FATCA has been virtually accepted by the global community."

If you have Unreported Income from Russian Banks or
other Foreign Banks, contact the Tax Lawyers of
Marini & Associates, P.A. for a FREE Tax Consultation at or Toll Free at 888-8TaxAid (888 882-9243).



Another Whistleblower Award - IRS Pays $38 Million!

The Internal Revenue Service has awarded an anonymous whistleblower $38 million for information leading to the recovery of between $127 million and $254 million in corporate taxes, according to the whistleblower's attorney. 

The payment is believed to be the second-largest whistleblower award under a program created by Congress that took effect in 2007.

The program awards between 15% and 30% of the taxes recovered by the IRS.

See our previous posts concerning IRS Whistle Blower Awards:

  1. IRS awash in whistleblowers after $104M payout!
  2. Attention All Whistle Blowers, The IRS Needs $$$!
  3. Tax Cheats May Claim IRS Whistleblower Rewards?
  4. Bradley Birkenfeld awarded $104 million (13% ) as UBS tax case whistleblower

The whistleblower's attorney, Scott Knott of Ferraro Law Firm in Washington, declined to name the whistleblower or the firm involved, although he said the corporation is among the top 500 public firms in the country. He released a redacted copy of the IRS's award notice verifying that the whistleblower received $38,037,899.

In July, IRS Commissioner Doug Shulman said publicly that the IRS was trying to determine claims in 10 whistleblower cases that were nearly complete.

Mr. Knott praised the IRS for its handling of the claim. "Both the existence and the name of the whistleblower remained completely confidential throughout this process, proving the IRS can reward corporate whistleblowers" without revealing their identity, he said.

Experts say this means the whistleblower likely was employed through much or all of the four years it took the IRS to process the claim.

Mr. Knott declined to discuss the issue involved in the claim, but did say it was more akin to aggressive corporate tax planning than outright fraud. He added that the claim was originally filed in early 2008, which means it was more quickly resolved than many cases.

Most tax-whistleblower cases take between 5 - 7 years to be resolved, in part because whistleblowers aren't paid until after the IRS is paid and the taxpayer's time to appeal has expired.

If you want to be a Wistle Blower or are Victum of a Wistle Blower, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).




Friday, October 26, 2012

New Timelines for FATCA

We originally Posted on October 25, 2012 - FATCA Timelines for Due Diligence & Other Requirements - Ann 2012-42, which discusses IRS Announcement 2012-42. The announcement presents new timelines for due diligence, withholding and documentation requirements as well as guidance on gross proceeds and grandfathered obligations.

The following are the key timeline changes announced and a graphic charting of the changes:

The announcement also includes a table to summarize the timing of certain due diligence requirements for withholding agents and financial institutions..

US Tax Rule Got you Wandering what to do?Contact the Tax Lawyers at:
Marini & Associates, P.A.
for a FREE Tax Consultation or or
Toll Free at 888-8TaxAid (888 882-9243).



Wednesday, October 24, 2012

FATCA Timelines for Due Diligence & Other Requirements - Ann 2012-42.

The Internal Revenue Service and Treasury Department issued guidance Oct. 24, which provides certain timelines for withholding agents and foreign financial institutions to complete due diligence required under the Foreign Account Tax Compliance Act (FATCA).

Announcement 2012-42 comes in response to a flurry of comments about FATCA proposed rules (REG-121647-10) issued in February and designed to tackle tax evasion.

Comments identified practical issues in implementing the chapter 4 rules within the proposed time frames and also requested that obligations that may give rise to foreign passthrough payments be treated as grandfathered obligations under certain conditions, among other concerns, IRS said.

IRS recognized these issues and provided guidance concerning certain grandfathered obligations and withholding on gross proceeds in Announcement 2012-42.

This announcement outlines:
(i) certain timelines for withholding agents and foreign financial institutions (FFIs) to complete due diligence and other requirements and
(ii) certain additional guidance concerning gross proceeds withholding and the status of certain instruments as grandfathered obligations under sections 1471 through 1474 of the Internal Revenue Code (Code).
The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to incorporate the rules described in this announcement in final regulations under sections 1471 through 1474.

The announcement also includes a table to summarize the timing of certain due diligence requirements for withholding agents and financial institutions.

Announcement 2012-42 publishes Nov. 19 in Internal Revenue Bulletin 2012-47.

US Tax Rule Got you Wandering what to do? ... Contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).



Tuesday, October 23, 2012

So Much For Moving Your Swiss Account to Singapore.

Singapore plans to classify tax evasion and abetting tax evasion as money-laundering predicate offences so that the powers used to investigate and prosecute money laundering will be available to seize the proceeds of tax crimes.

Foreign jurisdictions may also make requests for legal assistance to pursue tax evaders and their proceeds. The proposals are out for consultation until 9 December and will become law in July 2013.

If you have Unreported Income from Switzerland, Singapore or Other Foreign Banks, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or Toll Free at 888-8TaxAid (888 882-9243).


Asian Investor

Singapore Business Times

Monetary Authority of Singapore


Law Firm That Issued Opinion on "Abusive Tax Shelter," may be Subject to RICO.

The U.S. Court of Appeals for the Sixth Circuit Sept. 19 reinstated racketeering and misrepresentation claims against a law firm that allegedly provided incomplete and misleading opinion letters about the tax consequences of a welfare benefit plan ultimately found to be an abusive tax shelter (Ouwinga v. Benistar 419 Plan Services Inc., 6th Cir., No. 10-2531, 9/19/12).
The complaint plausibly alleged civil claims against the firm under the Racketeer Influenced and Corrupt Organizations Act--which authorizes treble damage awards to victorious plaintiffs, the court decided in an opinion by Judge Jane B. Stranch. It also found that the plaintiffs plausibly alleged the plaintiffs' reliance on the opinion letters as needed for them to pursue their misrepresentation claim.

Stephen Ouwinga and others filed a class action against various parties in connection with the nationwide marketing and selling of the Benistar 419 Plan, a purported tax-deductible welfare benefit plan.

The plaintiffs allege that the lawyers created opinion letters falsely promoting an investment scheme as a tax-saving device. Two of the defendants are Edwards Angell Palmer & Dodge LLP and attorney John H. Reid III. The plaintiffs assert that their decisions about the plan were partly based on a legal opinion that Reid issued in 1998, which was included in the marketing materials for the plan, and three opinions that Reid issued in 2003.

The plaintiffs terminated the plan in 2006. The IRS ultimately disallowed deductions related to the plan, which it held to be an “abusive tax shelter,” and assessed taxes, interest, and penalties.

The complaint alleges racketeering claims based on mail and wire fraud under 18 U.S.C. §1962(c), which makes it unlawful to conduct or participate in the affairs of an enterprise through a pattern of racketeering activity, and a RICO conspiracy (18 U.S.C. 1962(d)). It also alleges the tort of misrepresentation against all the defendants, along with an assortment of other state law claims against various defendants besides Edwards Angell and Reid.

The trial court dismissed the entire complaint. It found that the plaintiffs failed to sufficiently plead certain elements of a valid RICO claim, and that various disclosures and disclaimers doomed the plaintiffs' state law claims.

Construing the complaint in the light most favorable to the plaintiffs, the court determined that it stated viable RICO and misrepresentation claims against Edwards Angell and Reid.

Under RICO, a person who is a member of an enterprise that has committed any two of 35 crimes—27 federal crimes and 8 state crimes—within a 10-year period can be charged with racketeering. Those found guilty of racketeering can be fined up to $25,000 and sentenced to 20 years in prison per racketeering count.

In addition, the racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of "racketeering activity." RICO also permits a private individual harmed by the actions of such an enterprise to file a civil suit; if successful, the individual can collect treble damages.

Under the law, the meaning of racketeering activity is set out at 18 U.S.C. § 1961. As currently amended it includes:
  • Any violation of state statutes against gambling, murder, kidnapping, extortion, arson, robbery, bribery, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in the Controlled Substances Act);
  • Any act of bribery, counterfeiting, theft, embezzlement, fraud, dealing in obscene matter, obstruction of justice, slavery, racketeering, gambling, money laundering, commission of murder-for-hire, and several other offenses covered under the Federal criminal code (Title 18);
  • Embezzlement of union funds;
  • Bankruptcy fraud or securities fraud;
  • Drug trafficking; long-term and elaborate drug networks can also be prosecuted using the Continuing Criminal Enterprise Statute;
  • Criminal copyright infringement;
  • Money laundering and related offenses;
  • Bringing in, aiding or assisting aliens in illegally entering the country (if the action was for financial gain);
  • Acts of terrorism. 
Regarding the RICO claims against Edwards Angell and Reid, the district court viewed the complaint as alleging that they merely rendered traditional legal services and did not participate in any affairs beyond the operation of their own business.

The appeals court didn't see it that way. The complaint alleged that the lawyer defendants carried out the directions of the Benistar entities by providing allegedly incomplete and misleading legal opinions, all the while knowing that contributions to the plan were not likely to be allowed as deductions, the court said.

Although the lawyer defendants provided the opinion letters to their client Benistar, the court said, the plaintiffs alleged the lawyers knew the purpose of the plan was to falsely represent tax benefits, knew of IRS warnings that these types of plans would not qualify for deductions, and created their opinion letters for the purpose of falsely promoting the plan as a tax-saving device to potential investors.

The complaint plausibly alleged that the lawyer defendants participated in the enterprise's affairs and not merely their own, the court concluded.

It also found that the complaint adequately alleged a pattern of racketeering activity sufficient to withstand a motion to dismiss. The similarity of the opinion issued in 1998 and those issued in 2003 can plausibly indicate, the court said, that the lawyer defendants participated in the fraudulent enterprise over that entire period.

Have a Tax Problem?  Contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).