David Selig (R) is a Federal Tax Practitioner and licensed Property Damage Insurance
Adjuster. Bradley Dorin (L) is a Tax and Property Damage Insurance Attorney
Two New York Residents Plead Guilty in Separate Stolen Identity Refund Fraud Schemes
"They should have hired SELIG & Associates"
Two Queens, New York,
residents pleaded guilty for their roles in separate stolen identity refund fraud schemes, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax
Jattan, 44, pleaded guilty to identity theft. According to the plea agreement and documents filed with the court, from April 2012 through June 2012, Jattan stole student IDs from packages he
delivered for a university located in New York and sold the stolen IDs to other individuals who used the IDs to file fraudulent tax returns with the Internal Revenue Service (IRS). Jattan
admitted that he caused a tax loss of between $250,000 and $550,000.
scheduled for March 21, 2018 before U.S. District Court Judge Edward R. Korman. Jattan faces a statutory maximum sentence of 15 years in prison. He also faces a period of supervised
release, restitution, and monetary penalties.
In a separate
scheme, Michael Bratton, 51, pleaded guilty to conspiring to defraud the United States. According to the plea agreement and documents filed with the court, from January 2011 through June 2012,
Bratton purchased stolen IDs, which he provided to a co-conspirator for the purpose of filing fraudulent tax returns with the IRS. Bratton admitted to causing a tax loss of more than
scheduled for March 21, 2018 before U.S. District Court Judge Edward R. Korman. Bratton faces a statutory maximum sentence of five years for conspiring to defraud the United States. He also
faces a period of supervised release, restitution, and monetary penalties.
Assistant Attorney General Stuart M. Goldberg thanked special agents of IRS Criminal Investigation and the U.S. Postal Inspection Service, who conducted the investigations, and Trial Attorneys Mark
Kotila and Ann M. Cherry of the Tax Division, who are prosecuting these cases.
Owner of New York Tax
Preparation Firm Pleads Guilty
to Preparing Fraudulent Tax
"He should have hired SELIG & Associates"
A Brooklyn, New York, resident pleaded guilty to aiding and assisting in the preparation of a fraudulent tax return, announced Acting
Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Bridget Rohde for the Eastern District of New York. According to documents and
information provided to the court, Maria Munoz, 45, owned and operated a Brooklyn-based tax preparation business called Munoz Multiservices Corporation. From 2010 through 2012, Munoz
prepared fraudulent income tax returns for clients that included inflated or fictitious deductions for gifts to charity, unreimbursed employee expenses, personal property taxes and other
expenses. Munoz agreed that she caused a tax loss of $136,789. Sentencing is scheduled for April 26, 2018 before U.S. District Court Judge Kiyo A. Matsumoto. Munoz faces a statutory maximum
sentence of three years in prison, a period of supervised release, restitution and monetary penalties.
WORK PAID OFF!"
fighting for this for a very long time, said David Selig of Selig & Associates. Admittedly, the Treasury’s proposal isn’t everything we fought for, but it’s a hell of a start. Federal Tax
Practitioner David Selig and Tax Attorney Bradley Dorin vigorously opposed the Government’s use of outside Counsel for what is colloquially called “eggshell audits” (and other IRS
interviews). These hired gun attorneys make confusion a crime, said Bradley Dorin. The
deck is stacked against the taxpayer already, said Selig. The taxpayer has the burden of proof and the burden of persuasion. In other words, you’re guilty until proven innocent, or to a lesser
extent, until you're proven "not guilty" agreed Dorin. And remember, the IRS isn’t obligated to inform a taxpayer that the information he provides during an audit may be used against him in a
criminal proceeding. And yet, the IRS is not supposed to trick and deceive a taxpayer into believing
that a criminal investigation is not occurring concurrently, even though it may very well be (a slippery slope). United States v. Tweel held that simultaneous criminal and civil audits are 100%
permissible. For more information, contact David Selig or Bradley Dorin directly at (212) 974-3435 Final Regulations under IRC Section 7602 on the Participation of a Person Described in IRC Section 6103(n) in a
Summons Interview. Under the proposed
changes to the above referenced regulation, attorneys who are private contractors, viz. outside counsel, will be prohibited from assisting IRS Agents who audit of taxpayers. Nota
bene, this proposal includes in the interview process.
Understanding Nominees and the Alter Ego Doctrine IRS ENFORCEMENT & YOU
The doctrine by which a court of law holds
individual shareholders liable for a corporation’s debts if the corporation is deemed to be nothing more than an “alter ego” of the corporation’s owners.
"In a nutshell, the nominee and alter ego theory
holds that when a taxpayer retains the benefit, use, or control of transferred assets, the IRS can legally seize those assets – and quite literally, put the financial boots to
you!” says David Selig of Selig and
FYI Fraud is not a
necessary element for the application of the alter ego doctrine. Ragan v. Ragan v. Tri-County Excavating, Inc., 62 F.3d at 508 (Under Pennsylvania law, “no finding of fraud or illegality is required
before the corporate veil may be pierced, but rather the corporate entity may be disregarded ‘whenever it is necessary to avoid injustice.’”) (citations omitted) (non-tax case); DeWitt Truck Brokers,
Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681, 684 (4th Cir. 1976) (non-tax case) (“[P]roof of plain fraud is not a necessary element in a finding to disregard the corporate entity.”) (citing,
among other cases, Anderson v. Abbott, 321 U.S. 349, 362 (1944); National Marine Service, Inc. v. C.J. Thibodeaux & Co., 501 F.2d 940, 942 (5th Cir. 1974)). The Eighth Circuit in Scherping,
supra, also noted that “proof of strict common law fraud was not required” to apply the reverse piercing branch of the alter ego doctrine, and affirmed the district court’s holding that the trusts
were “sham entities created on behalf of and used by the taxpayers to evade payment of their federal income tax liabilities.” 187 F.3d at 802 (citations omitted).
Courts that have been
called upon to apply the alter ego doctrine in tax cases use objective factors in determining whether an alter ego relationship exists. See, e.g., Century Hotels v. United States, 952 F.2d 107, 110
n.5 (5th Cir. 1992) (listing numerous objective factors to be considered in alter ego case, including: (1) whether taxpayer expended personal funds for property titled in the name of the entity; (2)
whether taxpayer enjoyed the benefit and use of the property; (3) whether a close family relationship existed between taxpayer and title holder of property; (4) whether taxpayer exercised dominion
and control over the property; (5) whether the entity maintained its own books and records, including bank accounts; (6) whether funds are transferred between taxpayer and the entity showing
commingling of assets; and (7) whether the entity has its own separate existence and identity); Horton Dairy, Inc. v. United States, 986 F.2d 286, 289 (8th Cir. 1993); Loving Saviour Church v. United
States, 728 F.2d at 1086 (church was alter ego of taxpayers where taxpayers treated church assets as their own in that their residence, business and farmland comprised church property; insurance was
in taxpayer’s name; taxpayer was the minister and trustee and was in control of the church; church funds used to pay personal expenses of taxpayer; close family relationship between church officers
and taxpayer; taxpayers transferred property to church for little or no consideration; taxpayers supported by church funds); F.P.P. Enters. v. United States, 830 F.2d at 118 (listing objective
factors); Zahra Spiritual Trust v. United States, 910 F.2d at 245; Lemaster v. United States, 891 F.2d 115, 117-119 (6th Cir. 1989); Grant Investment Fund v. IRS, 1993 WL 269617 (9th Cir. 1993); Towe
Antique Ford Foundation v. IRS, 791 F. Supp. 1450, 1453 (D. Mont. 1992) (listing objective factors to be considered), aff’d, 999 F.2d 1387 (9th Cir. 1993).
The alter ego doctrine
has been applied by numerous courts to a variety of relationships that exist between a taxpayer and a corporation, partnership, trust, proprietorship or individual. See, e.g., Ross Controls, Inc. v.
United States, 164 B.R. 721 (successor corporations were alter egos of defunct corporate taxpayer); Today’s Child Learning Center, Inc. v. United States, 40 F. Supp.2d 268, 273-274 (E.D.
Pa. 1998) (second corporation was alter ego of taxpayer); United States v. Scherping, 187 F.3d at 801-804 (trusts were alter egos for taxpayers); F.P.P. Enterprises v. United States, 830 F.2d 114,
116-117 (8th Cir. 1987) (trusts were alter egos of taxpayers where the residence was conveyed by the taxpayers to the trust and the taxpayers continued to treat the residence as their own by (1)
continuing to live in the residence, and (2) paying the insurance, taxes and mortgage on the residence); United States v. Geissler, 1993 WL 625535 (D. Idaho 1993) (trust was nominee/alter ego of
taxpayers where: (1) taxpayers, as trustees maintain an absolute position of trust; (2) taxpayers need not consult anyone else in making decisions for the trust; (3) there is no provision imposing a
fiduciary responsibility on trustee; (4) there was no evidence of any consideration for transfer of property from taxpayers to trust; (5) and taxpayers continue to enjoy the benefits of the
transferred property); United States v. Gerads, 1993 WL 114411 (D. Minn. 1993) (Trust was alter ego of taxpayers), aff’d, 999 F.2d 1255 (8th Cir. 1993), cert. denied, 510 U.S. 1193 (1994)); Loving
Saviour Church v. the United States, 556 F. Supp. at 691-692 (D. S.D.), aff’d, 728 F.2d 1085 (8th Cir.) (unincorporated association, Church, was alter ego of taxpayers); Grant Investment Fund v. IRS,
1 F.3d 1246 (Table), 1993 WL 269617 (9th Cir. 1993) (partnership was an alter ego of taxpayer where: (1) taxpayer manages entity and has complete control over it; (2) taxpayer uses his own assets and
partnership assets interchangeably to pay debts; (3) investors in partnership are related to or controlled by taxpayer; (4) partnership made loans to taxpayer, such loans were approved by taxpayer as
manager of partnership and taxpayer did not repay the loans; and (5) taxpayer used partnership to discharge personal obligations and for personal gain); Lemaster v. United States, 891 F.2d 115,
117-119 (6th Cir. 1989) (son held to be the alter ego of the taxpayer-father where: taxpayer’s business ceased; a new business was started in the name of taxpayer’s son; new business acquired assets
of defunct business; new business was conducted in son’s name, but taxpayer was given power of attorney and controlled the new business).
Furthermore, if the
alter ego or a nominee relationship otherwise exists between a taxpayer and another party or entity, the timing of when the tax liabilities arose is legally irrelevant. Stated differently, the timing
of the creation of the trust or entity that is found to be an alter ego or nominee has no legal significance. See G.M. Leasing Corp. v. The United States, 429 U.S. at 350-351 (property of taxpayer’s
nominee or alter ego is subject to tax lien and levy); In re Richards, 231 B.R. at 578; United States v. Landsberger, 1997 WL 792506 at * 5 (D. Ariz. 1997) (timing of creation of trust has “no
import” if it is being used to avoid creditors) (citing G.M. Leasing, supra; F.P.P. Enters. v. United States, 830 F.2d at 118), aff’d, 172 F.3d 60 (9th Cir. 1999); accord United States v. Williams,
581 F. Supp. 756 (N.D. Ga.) (taxpayer’s nominee (his mother) took a title in real property before tax liabilities arose; however because the taxpayer was the true owner of the property, tax lien
(which arose after the property was purchased) attached and could be foreclosed on taxpayer’s interest therein); cf. Keefer v. Commissioner, 1993 WL 221066 (Tax Ct. 1993) (trust was a sham even
though tax liabilities arose after the creation of trust).