Source: http://federaltaxcrimes.blogspot.com/2016/01/government-asserts-wylys-fraud-in.html
Timestamp: 2019-04-20 14:51:44+00:00

Document:
n2 Dee also claims that she is entitled to relief under the innocent spouse provisions of I.R.C. § 6015(b) and (c) for all income tax deficiencies and interest.
(2) Were any taxable gifts made by the Wylys during the tax years at issue? If so, what were they and what are the amounts of any such gifts?
(a) any income tax deficiency?
(b) any gift tax deficiency?
(4) What tax years are open for the Wylys absent fraud?
(5) Are the Wylys liable for failure to file Forms 3520, 3520-A, and/or 5471? If so, what are the reportable transactions and what is the amount for each such failure?
(6) Which party has the burden of proof for each claim and defense?
(8) What is the proper calculation of interest in light of the suspension of interest under Internal Revenue Code § 6404(g)?
(9) If they apply, are the failure to file penalties excessive fines barred by the Eighth Amendment?
(10) Are laches or estoppel defenses applicable by the Wylys to the IRS claims?
The Court must determine the correct amount of (1) income tax liability for the Debtors for the tax years 1992-2013;3 (2) gift tax liability for (a) Sam Wyly for the tax years 2000-2005, and (b) Dee and Charles Wyly for the tax years 2001-2005 and 2010; and (3) liability for international penalties due to the Debtors’ failure to file Forms 3520, 3520-A, and 5471. The United States does not believe Dee Wyly is entitled to innocent spouse relief from any of the income tax or gift tax deficiencies, but will defer the substantive discussion of this issue pursuant to the extension of time the Court has given Ms. Wyly on this issue.
The United States asserts that the statute of limitations for the income and gift tax periods at issue is open due to the fact that the Wylys committed civil tax fraud. Notwithstanding the fraud issue, however, the United States asserts, and the Wylys admitted, that I.R.C. § 6501(c)(8) keeps open the statute of limitations for tax years 1998-2013. Thus, the fraud issue is only necessary to keep the statute of limitations open for tax years 1992-1997. The United States is not subject to the defense of laches in enforcing its rights. United States v. Summerlin, 310 U.S. 414, 416 (1940); see also Redstone v. Comm’r, T.C. Memo 2015-237, at *23-24 (Dec. 9, 2015) (“The inapplicability of the laches doctrine is especially clear where (as here) the Government seeks to enforce tax claims that are governed by an express statute of limitations.”); Jacksonville Paper Co. v. Tobin, 206 F.2d 333, 334 (5th Cir. 1953).
In SEC v. Wyly, the District Court found that the IOM Trusts were “grantor trusts” from their inception through 2004. The United States contends that this finding applies to years after those in the SEC litigation, i.e., 2005-2013, because the Debtors failed to identify material factual or legal changes relating to the IOM Trusts beyond 2004 (the final year addressed in the District Court’s findings).
In this self-reporting system, the United States relies upon taxpayers’ own disclosures for the collection of its income tax. The Debtors engaged in intentional wrongdoing with the specific intent to avoid taxes. The Debtors’ fraud is established, in part, by several badges of fraud, including (1) their understatement of income; (2) inadequate records; (3) failure to file tax returns; (4) implausible or inconsistent explanations of behavior; (5) concealing assets; and (6) failure to cooperate with tax authorities.
e. the Wylys misrepresented facts to, or disregarded factual assumptions made by, their legal and tax professionals upon whom they rely as their defense in this matter.
Dee Wyly does not escape the fraud penalties merely because she purposefully engaged in a pattern of “willful blindness” seeking to ignore the tax fraud being used to finance her opulent lifestyle.
Also with respect to Ms. Wyly, the United States asserts that the joint income tax returns Ms. Wyly signed with her late husband, Charles Wyly, beginning in 1992 until his death, were fraudulent returns without regard as to whether Ms. Wyly is liable for the fraud penalty.
As part of their fraudulent scheme, the Wylys created and employed an entity, Security Capital Limited, merely as an intermediary of their Offshore System to funnel money the IOM to the Wylys.

References: § 6015
 § 6404
 § 6501
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