The Tax Times: When Offshore Trusts Meet IRS Collection: United States v. Kroner

The IRS’s long‑running battle with Florida taxpayer Burt Kroner shows how far the government will go to reach assets held in offshore trusts when a large tax bill goes unpaid. In United States v. Kroner et al., 9:25‑cv‑80877 (S.D. Fla., West Palm Beach), the government sued Kroner, family members, and a Bahamian trustee to repatriate foreign trust assets and satisfy a tax liability topping $27–28 million.

The backstory: cash transfers and Bahamian trusts

The Kroner dispute traces back to cash transfers Kroner received from a former British business associate between 2005 and 2007. According to court filings, he received about $25 million in cash, took the position that the transfers were not taxable, and then moved substantial amounts into Bahamian trusts.

Two structures are central to the current enforcement case:

The Kroner Family Trust 2004, funded with roughly $12.675 million via a series of transfers from 2005–2006.
The Kroner Family 2007 Trust (often referenced as a separate settlement), funded with another $5 million in 2007.

By 2012, the IRS had assessed approximately $13 million in tax, penalties, and interest related to the transfers, and litigation ensued over deficiency and penalties, including the Eleventh Circuit’s decision in Kroner v. Commissioner on section 6751(b) supervisory approval. While the procedural penalty fight was significant, it did not eliminate the underlying income tax, and the government alleges that, over nearly two decades, Kroner’s unpaid balance has ballooned to around $27–28 million with additions and interest.

The enforcement suit: repatriation and injunctive relief

On July 10, 2025, the United States filed a civil action in the Southern District of Florida, United States v. Kroner et al., seeking to collect the assessed liabilities and reach assets held in the Bahamian trusts.

The complaint names as defendants:offshorealert+3

Burt Kroner
Family members Alyson (Allyson) and William Kroner
Equity Trust Bahamas Ltd. as trustee of the 2004 and 2007 Bahamian trusts.dockets.justia+2

The government’s theory is straightforward: although the assets sit in foreign trusts under Bahamian law, Mr. Kroner and his family benefit from them and have sufficient control or influence that a U.S. court can order them to take steps to bring assets back to the United States.

Enforcement of federal tax liens arising from the assessments.
Injunctive relief restricting transfers from the Bahamian trusts.
A repatriation order compelling Kroner to cause sufficient trust assets to be brought into the U.S. to satisfy the IRS’s claim.

Notably, this collection case follows a bankruptcy proceeding in which a Florida bankruptcy court ruled that the Bahamian trusts and their assets were not subject to the automatic stay, clearing the way for separate district court enforcement.

Bahamian law vs. U.S. collection power

A major flashpoint is whether Bahamian law can insulate the trusts from U.S. collection efforts. Kroner’s side has pointed to foreign law constraints and argued that the IRS compromised any secured lien position by filing an unsecured proof of claim in bankruptcy, attempting to undermine the government’s lien‑enforcement posture.

DOJ’s response is that foreign law cannot be used as a shield when a U.S. court has personal jurisdiction over the taxpayer. In March 2026 filings, the government argued that:

The court can order a U.S. taxpayer–beneficiary to exercise whatever rights and powers he has over foreign trust structures to repatriate assets.
Personal jurisdiction over the settlor/beneficiary is enough to support repatriation and injunctive relief, even though the court cannot directly command the foreign trustee

This line of argument echoes earlier repatriation and contempt cases, where courts have jailed taxpayers who refused to bring back offshore assets despite having the ability—at least on paper—to direct trustees or otherwise access the funds.

Injunctions, freezes, and a settlement

Early 2026 saw key motion practice over how tightly the Bahamian trusts would be restricted while the case was pending. On one hand, DOJ moved for strong relief, including an offshore asset freeze and repatriation of funds. On the other, the defense argued for access to trust assets for living expenses and contested the scope of any freeze.

Public reports show a middle path:

In February 2026, the court granted a preliminary injunction limiting transfers from the Bahamian trusts and partially freezing the accounts, while allowing a measured flow of funds to the family.
DOJ later agreed to drop its broader bid for a full offshore asset freeze as part of a partial deal governing ongoing trust distributions during the litigation.

By April 2026, Bloomberg and other outlets reported that Kroner and the IRS had reached a settlement resolving the dispute over the frozen Bahamian trust funds. Filings indicate that the resolution followed the court’s injunction and negotiations over access to the foreign trust accounts, though detailed terms were not publicly disclosed.

Practical lessons for planners and taxpayers

For tax professionals and planners working with clients who have offshore trusts or are considering them, Kroner offers several practical takeaways:

Offshore does not mean off‑limits. U.S. courts repeatedly show that they will use personal jurisdiction, the All Writs Act, and federal collection statutes to force repatriation of foreign assets when necessary to satisfy tax or other federal debts.
Trust “control” is broader than formal titles. Even if a foreign trustee appears independent, a settlor or beneficiary with practical ability to influence distributions or trustee decisions may be treated as capable of bringing assets back, with civil contempt as the enforcement hammer.
Bankruptcy does not solve offshore exposure. The fact that a bankruptcy court allowed the Bahamian trusts to sit outside the automatic stay did not prevent DOJ from later pursuing the assets through a targeted district court enforcement case.
Long‑term noncompliance gets very expensive. Kroner’s alleged liability grew from an initial assessment in the low‑teen millions to roughly $27–28 million over time, illustrating how interest and penalties can compound during years of resistance and litigation.news.
Procedure matters, but it is not everything. The earlier Eleventh Circuit opinion in Kroner v. Commissioner on section 6751(b) limited penalty exposure, yet the core income tax liability survived, and the IRS remained willing to litigate aggressively to collect.legacy.

For advisors, the message is clear: clients cannot rely on foreign trust structures or local secrecy laws to escape U.S. tax enforcement once they are under the jurisdiction of a federal court. The better path is proactive compliance, early engagement with the IRS when issues appear, and careful planning that assumes U.S. courts will look through form to substance in offshore arrangements.

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