Frauds using Trusts

Tax Fraud

Trusts are often sold through seminar programs by promoters who make claims about them that are clearly untrue.  Typically trusts are legitimately used for estate planning, asset protection, and for specialized business financing.  Creation of trusts do not change the tax law, make deductions where none existed before, lower taxes (except in ways decreed by Congress or the IRS), or offer any other magic benefit.  The seminars usually oversell the benefits and often place the buyers in risk of tax penalties or even jail time.

Investors of abusive trust schemes that improperly evade tax are still liable for taxes, interest, and civil penalties. Violations of the Internal Revenue Code with the intent to evade income taxes may result in a civil fraud penalty or criminal prosecution. Civil fraud can include a penalty of up to 75% of the underpayment of tax attributable to fraud, in addition to the taxes owed. Criminal convictions of promoters and investors may result in fines up to $250,000 and up to five years in prison. Criminal statutes that maybe applicable are as follows:
• Title 18 USC 371, Conspiracy to Defraud the IRS
• Title 26 USC 7201, Tax Evasion
• Title 26 USC 7206 (1), Subscription to a False Tax Return
• Title 26 USC 7206(2), Aiding or Assisting in a False Tax Return
• Title 26 USC 7212(a), Corrupt or Forcible Interference with the Administration of Internal Revenue Laws
• Title 31 USC 5314, Records and Reports on Foreign Financial Agency Transactions