Caraker Law Firm, P.C. HOME ABOUT SERVICES BLOG DISCLAIMER FRAUD AND STATUTE OF LIMITATIONS Posted on September 28, 2021 by katemley IRC Section 6501(c)(1) The United States Tax Court in George S. Harrington v. Comm’r of Internal Revenue handed down an opinion on July 26, 2021 at Docket No. 13531-18, in which it ruled that the taxpayer fraudulently underreported his income for some years at issue and therefore, his argument that the three year statute of limitations found in IRC 6501(a) barred assessment was not valid. This case has an entertaining fact pattern that includes details of the European lumber exporting trade to Canada, bank arrangements in the Cayman Islands and deposit activity in Swiss Bank Accounts. The key transaction at issue, and its evolution over time, relates to the sale of taxpayer’s home that resulted in the availability of $350,000. Taxpayer invested these funds with his former employer’s lawyer into a Union Bank of Switzerland (UBS) account under the name of Reed International, Ltd., a Cayman Islands entity. In 2009, the United States entered into a deferred prosecution agreement with UBS based on charges of conspiracy to defraud the U.S. by impeding the IRS in the ascertainment, computation, assessment and collection of taxes during the period 2002-2007. The taxpayer’s account was closed by UBS, at which point, a UBS banker connected him with a Swiss National who suggested the taxpayer invest in a life insurance policy in Liechtenstein. Ultimately the life insurance policy was canceled and the assets were moved into a bank account in taxpayer’s wife’s name…also in Liechtenstein. Needless to say, none of the income attributable to the offshore accounts appeared on taxpayer’s self-prepared tax returns. The IRS examined taxpayer based on documentation from the deferred prosecution agreement obtained from UBS and proposed assessments. The taxpayer argued that the notice of deficiency was issued more than six years after the period of limitations began to run. However, IRC Section 6501(c)(1) provides that where the taxpayer filed a false or fraudulent return with the intent to evade tax, there is no statute of limitations on assessment. The last half of the opinion, some twenty pages, explores the details of the fraud provision and ultimately allows for partial assessment beyond the normal statutory timeframe. Share this: TwitterFacebook Loading... Related Passport Revocation September 21, 2021 In "FAST Act" Trust Fund Recovery Penalty October 19, 2021 In "creditors" Offer in Compromise November 2, 2020 In "Collection Due Process" Tagged Cayman Islands, Fraud, Liechtenstein, Life Insurance, Statute of Limitations PREVIOUS POST Passport Revocation NEXT POST Administrative File Rule HOME ABOUT SERVICES BLOG DISCLAIMER A WordPress.com Website. Follow