Wednesday, June 4, 2008
Tax Shelter Viruses
"If you need a reminder that money doesn't buy happiness, consider the sad case of Henry T. Ncholas III. ... One Nicholas nightmare that's gone unnoticed is his fight with the [IRS] over whether his family can claim $290 million in tax losses from a $6 million investment in junk Asian debt and securities. ... 'Once you find one type of tax shelter and list it [as abusive], you will get a creative accountant, tax lawyer or other type of promotional salesperson tweaking the shelter,' says Nathan J. Hochman, head of the [DOJ's] Tax Division. ... KPMG is no longer cold-calling shelter prospects. Yet smaller firms, independent CPAs, lawyers and insurance salesmen continue to flog new--and old--shelter mutations to business owners and the successfully self-employed. ... Seyfarth Shaw wrote a 104-page opinion before the 2004 law change saying the shelters would 'more likely than not' withstand IRS and judicial scrutiny. The firm declined comment. Jay D. Adkisson, an attorney ... says ... 'Offshore promoters have become more sophisticated in what they do,' ... 'People think, "If my lawyer showed it to me, it's okay." But if something involves offshore, get a second opinion,'" Forbes, 2 June 2008.
I see these schemes from time-to-time. 90-95% of the ones I've seen aren't worth the paper they're printed on, whether or not accompanied by a legal opinion.