Offshore Structure to Hold Iraqi Dinars?
I have received a number of inquiries recently regarding the taxation of gains associated with the disposition of Iraqi dinars. Some of the inquiries have related to the formation of an offshore structure (such as an offshore trust, foundation, corporation, etc.) to hold the Iraqi dinars.
If you are a U.S. citizen or a U.S. resident, the short answer to the question of whether you should set up such a structure is “no.” The long answer is the same - “No, you should not set up an offshore structure to hold your Iraqi dinars.”
Make sure that you speak with a qualified U.S. tax advisor before setting up or being associated with any non-U.S. entity, corporation, partnership, structure, trust, foundation, etc. The penalties for simply failing to disclose to the I.R.S. various offshore transactions can be huge.
The amount of U.S. tax imposed on the sale of an asset can increase when held through an offshore structure. A qualified U.S. tax advisor can help you understand what disclosure rules and potential penalties may apply, as well as the risks, costs, and benefits of setting up an offshore structure.
FOR IMMEDIATE RELEASE
MONDAY, MAY 23, 2011
TDD (202) 514-1888
NEW JERSEY UBS CLIENT SENTENCED FOR FAILING TO REPORT MORE THAN $750,000 IN SWISS BANK ACCOUNT
NEWARK, N.J. - A Hillsdale, N.J., woman was sentenced today to probation after admitting she filed a false tax return and concealed more than $750,000 in a Swiss bank account, New Jersey U.S. Attorney Paul J. Fishman and Principal Deputy Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division announced.
Lucille Abrahamsen Jackson pleaded guilty on Nov. 18, 2010, to an information charging her with willfully subscribing to a false tax return. Jackson entered her guilty plea before U.S. District Judge Dennis M. Cavanaugh, who also imposed the sentence today in Newark federal court.
According to documents filed in this case and statements made in court, Jackson admitted that she signed and filed a false tax return for 2005 that failed to disclose her UBS account and income generated from the account’s assets. Jackson also failed to file a Report of Foreign Bank or Financial Accounts (FBAR) with respect to the UBS account. The account, originally opened in 1992, was transferred in 2000 into the name of Primrose Properties S.A., a nominee Panamanian corporation. Jackson’s father, Harry Abrahamsen, established Primrose in 2000 with the assistance of a foreign lawyer and a Swiss banker, in order to hide the account from the Internal Revenue Service (IRS). On April 12, 2010, Abrahamsen pleaded guilty to a federal charge of failing to file an FBAR, admitting he concealed more than $1 million in Swiss bank accounts. He is scheduled to be sentenced on May 24, 2011, by Judge Cavanaugh.
U.S. citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax returns. Additionally, U.S. citizens must file an FBAR with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.
Jackson admitted that her failure to file the FBAR and her failure to disclose the existence of the UBS account on her personal income tax returns allowed her to underreport personal income for the years 2000 through 2007. In 2003, the account reached a high balance of more than $759,376.
UBS entered into a deferred prosecution agreement in February 2009, in which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of its agreement, UBS provided the U.S. government with the identities of, and account information for, certain U.S. customers of UBS’ cross-border business.
As a condition of her guilty plea, Jackson has agreed to pay an FBAR penalty of $379,688.
U.S. Attorney Fishman and Principal Deputy Assistant Attorney General DiCicco commended special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, for the investigation leading to today’s sentence.
The government is represented by Assistant U.S. Attorney Stacey A. Levine of the U.S. Attorney’s Office Criminal Division and Trial Attorney Michael C. Vasiliadis of the Department of Justice’s Tax Division.
FOR IMMEDIATE RELEASE
FRIDAY, MARCH 4, 2011
TDD (202) 514-1888
FORMER UBS CLIENT SENTENCED FOR HIDING MILLIONS
IN OFFSHORE BANK ACCOUNTS
Paid $2.1 Million Penalty to IRSSEATTLE – Arthur Joel Eisenberg of Seattle was sentenced today to three years probation by U.S. District Court Judge John Coughenour, the Justice Department and the Internal Revenue Service (IRS) announced today. Eisenberg pleaded guilty in December 2010 to willfully filing a false individual income tax return.
According to court documents filed in this case and statements made in court, Eisenberg admitted to filing a false tax return for 2004 in which he failed to report that he had an interest in or signature authority over financial accounts at UBS AG, one of Switzerland’s largest banks. He also admitted failing to report the income earned on his UBS financial accounts on his tax return. At the end of 2004, the total balance of Eisenberg’s various UBS financial accounts exceeded $3.1 million.
As part of his guilty plea, Eisenberg admitted that he opened a bank account at UBS in the Cayman Islands as early as 1983. The assets held in the account were later transferred to UBS AG in Zurich. In May of 2004, Eisenberg authorized and caused the formation of a Hong Kong corporation named East West Universal Limited and promptly transferred his assets from his existing UBS account to a new UBS account in the name of the corporation. However, Eisenberg continued to be the beneficial owner of the account and earned income from it through 2008. In 2008, Eisenberg instructed UBS to close the account and transfer the funds in the account to another large global Swiss bank headquartered in Zurich. The highest year-end balance of Eisenberg’s various accounts occurred in 2007 and exceeded $4.2 million.
Eisenberg paid a $2.1 million penalty for failing to file a Report of Foreign Bank or Financial Account (FBAR) form. An FBAR is a form separate from an income tax return that a taxpayer is required to file with the IRS every June to disclose additional information about foreign financial accounts over which the taxpayer has signature authority or other control over, and which had an aggregate value exceeding $10,000 at any time during the year.
Acting Deputy Assistant Attorney General for Offshore Matters Bruce Salad of the Justice Department’s Tax Division and Jenny A. Durkan, U.S. Attorney for the Western District of Washington, commended the investigative efforts of the IRS agents involved in this case, as well as trial attorney Stephanie M. Carowan of the Tax Division and Assistant U.S. Attorney Nicholas W. Brown who prosecuted the case.
FOR IMMEDIATE RELEASE
WEDNESDAY, FEBRUARY 23, 2011
TDD (202) 514-1888
FOUR SWISS BANKERS CHARGED WITH HELPING U.S. TAXPAYERS USE SECRET ACCOUNTS AT SWISS BANKS TO EVADE U.S. TAXESWASHINGTON - Marco Parenti Adami, Emanuel Agustino, Michele Bergantino and Roger Schaerer, bankers at an international bank incorporated and with its headquarters in Zurich, Switzerland, with offices worldwide, including New York City and Miami, were indicted by a federal grand jury in the Eastern District of Virginia and charged with conspiring with other Swiss bankers to defraud the United States, the Justice Department and the Internal Revenue Service (IRS) announced today.
Neil H. McBride, U.S. Attorney for the Eastern District of Virginia; John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division; and Douglas Shulman, Commissioner of the IRS, made the announcement.
According to the indictment, the international bank’s managers and bankers engaged in illegal cross-border banking that was designed to assist U.S. customers evade their income taxes by opening and maintaining secret bank accounts at the bank and other Swiss banks. As of the fall of 2008, the international bank maintained thousands of secret accounts for customers in the United States with as much as $3 billion in total assets under management in those accounts. The conspiracy dates back to 1953 and involved two generations of U.S. tax evaders including U.S. customers who inherited secret accounts at the international bank.
The indictment asserts that Marco Parenti Adami, an Italian national, was a Geneva, Switzerland-based member of senior management at the bank where he catered to high net worth individuals in North America and managed other bankers with similar clientele. It is also alleged that Roger Schaerer, a Swiss national, worked for the bank in New York City where he assisted U.S. taxpayers with their secret accounts. The indictment also alleges that Emanuel Agustino and Michele Bergantino were bankers for the international bank who traveled to the United States to assist U.S. taxpayers in evading their U.S. taxes through the use of secret bank accounts in Switzerland. It is further alleged in the indictment that Emanuel Agustino left the international bank and continued the tax fraud scheme at two other private Swiss banks.
According to the indictment, the defendants and their co-conspirators solicited U.S. customers to open secret accounts because Swiss bank secrecy would permit them to conceal from the IRS their ownership of accounts at the bank and other Swiss banks. It is further alleged that they provided unlicensed and unregistered banking services and investment advice to customers in the United States in person while on travel to here, including at the international bank’s representative office in New York City and by mailings, e-mail and telephone calls to and from the United States.
The indictment further alleges that the defendants and their co-conspirators caused U.S. customers to travel outside the United States, to destinations including Switzerland and the Bahamas, to conduct banking related to their secret accounts; opened secret accounts in the names of nominee tax haven entities for U.S. customers; accepted IRS forms that falsely stated under penalties of perjury that the owners of the secret accounts were not subject to U.S. taxation; advised U.S. customers to structure withdrawals from their secret accounts in amounts less than $10,000 in an attempt to conceal the secret account and the transactions from American authorities; and advised U.S. customers to utilize offshore credit, and debit cards linked to their secret accounts and provided the customers with such cards, including cards issued by American Express, Visa and Maestro.
According to the indictment, after the bank decided to close the secret accounts maintained by U.S. customers, the defendants encouraged and assisted the customers to transfer their secret accounts to other banks in Switzerland and Hong Kong as a means of continuing to hide their assets from the IRS and discouraged the customers from disclosing their secret accounts to the IRS through the Voluntary Disclosure Program.
A criminal indictment is only an accusation and a defendant is presumed innocent until proven guilty. If convicted, the defendants each face a maximum of five years in prison and a maximum fine of $250,000.
U.S. Attorney McBride and Acting Assistant Attorney General DiCicco commended the investigative efforts of the IRS agents involved in this case, as well as Senior Litigation Counsels Kevin M. Downing and John E. Sullivan and Trial Attorneys Mark F. Daly, Tino M. Lisella and Melissa Siskind of the Tax Division, and Assistant U.S. Attorney Mark Lytle, who are prosecuting the case.
United States v. Marco Parenti Adami, et al.