The Tax Times

Wednesday, July 1, 2026

Marini & Associates, PA Traces its Roots Back to Arthur Andersen & Co. (AA&Co.)

For those of you who don't know what I did before opening up our International & Tax Litigation Boutique 33 years ago (1993-Present); I was with AA&Co. for 11 years prior to that, in their Miami, Florida office (1982-1992).

While there I had the wonderful opportunity of learning my vocation from some of the best in the business like Ivan Fagan, the firm's Real Estate Syndication Expert and Larry Levine, the Miami Offices resident Tax Genius, not to mention my long-term mentor and colleague Bill Pruitt, who was Office Managing Partner during the years that I worked at AA&Co.

Since most of my clients where large multinationals, I had the opportunity over 11 years to learn some of the most advanced international planning techniques and then I had the opportunity to defend many of them before the IRS; which resulted in me being listed as 1 of 15 International Tax Specialist in AA&Co.’s Worldwide Directory and it also allowed me to teach annually at the firm's US Taxation of Multinational Activities in St. Charles, Illinois, along size such International Tax Giants as Andre Fogarasi, Richard Gordon, Diane Renfroe, and many, many, others Top International Tax Attorneys.

One day in the mid-1980s, while I was looking out our Miami office"s windows on the 21st floor, it became readily apparent that Miami was rapidly becoming the International Cruise Capital of the world and as a man in his late 20s, I was determined to get a piece of it. So we start targeting and obtained numerous international cruise lines, as clients of the firm. As a result of defending numerous international cruise lines clients, during the IRS Cruise Industry Tax Audits in the late 1980s, I also became 1 of 5 International Shipping Specialist for AA&Co in the US.

During my time with AA&Co, Arthur Andersen’s South Florida practice held a dominant position over that of the other international accounting firms.

Its three practice units, Tax - Audit & Consulting, were consistently among the most profitable within the firm (based on profit per professional).

The South Florida Practice had the Largest Share of Publicly-Held Clients and, because of its High Quality Service, it rarely lost a Client. A few of the long-time clients of the South Florida practice that remained clients until they were sold, or Andersen ceased business, included: Blockbuster Entertainment, AutoNation, IVAX Corporation, The Wackenhut Corporation, Southeast Toyota, KOS Pharmaceuticals, Republic Services, Sunglass Hut International, Steifel Laboratories, Watsco Corporation. Not to mention the numerous large closely held corporations, rivaling in size and sales, the above-mentioned publicly traded companies.

I left AA&Co on December 31, 1992 and 10 years later in June 2002, Andersen was found guilty of obstruction of justice for shredding documents relating to the audits of Enron Corporation. Andersen was forced to surrender its licenses to practice and in June 2002 the South Florida practice was effectively ended.

In May 2005, the Supreme Court of the United States unanimously reversed the conviction, however, it was too late for what had once been the most successful professional services firm in the world with 85,000 personnel and over $10 billion in revenue.

While at Andersen, we professionals were constantly challenged to improved our skills. The network of Andersen alumni in South Florida is still strong even though the firm ceased business in 2002. Many alumni are among the business elite in their local communities.

1988

Me & Kevin Lockwood of AA&Co, on my Client Sea Escape's Vessel.

30 Years Latter - 2018

Me (Marini & Associates, PA),
Kevin Lockwood (Forshee & Lockwood PA (CPA's)) &
David W. Appel (Cherry Bekaert, (CPA's))

We 3 work in the same 10 person cubicle workspace at AA&Co in the 1980's.

When You Have an International Tax

or IRS Tax Problem

and Need Experience Tax Representation...
Robert Blumenfeld, Esq.,Ronald Marini, Esq. & Anita Friedlander, Esq.

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax Consultation

at: www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

Panamanian Private Interest Foundations and Foreign Real Estate: Navigating the Limits of Lex Rei Sitae

Panamanian Private Interest Foundations are widely recognized as a powerful instrument for organizing and protecting family wealth, particularly in cross-border contexts. Their ability to separate legal ownership from economic benefit, while establishing clear governance and succession rules, makes them an attractive solution for international estate planning.

In practice, however, complications arise when foreign real estate is transferred directly into a Panamanian foundation as part of a broader effort to centralize ownership. While this approach may appear efficient, it introduces legal considerations that must be carefully evaluated.

The Constraint of Lex Rei Sitae

A fundamental principle of private international law is that rights over immovable property are governed by the law of the jurisdiction where the property is located. This doctrine, known as lex rei sitae, has significant implications for cross-border structures involving real estate.

Regardless of how ownership is structured, any dispute, enforcement action, or succession issue involving real property will ultimately be subject to the authority of local courts and regulatory frameworks. The governing documents of a Panamanian foundation—its charter and bylaws—do not override this principle.

For example, if real estate located in Colombia is transferred to a Panamanian Private Interest Foundation, all matters concerning the administration, enforcement, or defense of ownership rights will remain subject to Colombian law. Local courts may challenge ownership arrangements, impose injunctive measures, or even invalidate transfers, irrespective of the foundation’s internal provisions.

Structural Limitations of Direct Ownership

Direct ownership of foreign real estate by a Panamanian foundation can therefore limit the effectiveness of the structure. The foundation may control title in form, but it cannot displace the legal authority of the jurisdiction where the asset is situated.

This disconnect can create uncertainty in enforcement, complicate succession planning, and expose the structure to unintended legal risks in the foreign jurisdiction.

A More Robust Ownership Model

A more resilient approach involves holding real estate through a locally incorporated entity in the jurisdiction where the property is located. This structure is typically paired with a Panamanian holding company that owns the shares of the local entity. The shares of the Panamanian company are, in turn, owned by the Panamanian Private Interest Foundation.

This layered structure offers several advantages:

· Compliance with local legal and regulatory requirements governing real estate ownership

· Greater alignment between legal ownership and enforceability in the property’s jurisdiction

· The ability to conduct estate planning at the level of shares governed by Panamanian law

· Improved coordination between the foundation’s succession provisions and the underlying corporate structure

By shifting the planning focus to shares rather than directly to immovable property, the structure benefits from the flexibility of Panamanian law while respecting the constraints imposed by lex rei sitae.

Practical Considerations

It is important to recognize that even under this structure, any transfer or recognition of rights relating to the underlying real estate remains subject to the laws and procedures of the jurisdiction where the property is located. Corporate formalities, registration requirements, and local compliance obligations must still be observed.

The principle of lex rei sitae remains decisive and cannot be circumvented through structuring alone.

Conclusion

Panamanian Private Interest Foundations remain a highly effective tool for international estate planning when used within a properly designed legal framework. Their success depends on thoughtful structuring, careful alignment of corporate and foundation documents, and a clear understanding of the jurisdictions involved.

A coordinated, multi-jurisdictional approach—supported by well-documented corporate layers—provides greater certainty, enhances enforceability, and ensures that the structure fulfills its intended purpose of long-term wealth preservation and orderly succession.

Need International Tax Advice?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Tuesday, June 30, 2026

When Your C‑Corp Becomes Your Personal Wallet: Lessons from Waimana Enterprises, Inc., T.C. Memo. 2026‑53

The Tax Court’s decision in Waimana Enterprises, Inc. v. Commissioner (consolidated with Albert S.N. Hee and Wendy R. Hee v. Commissioner, T.C. Memo. 2026‑53) is a case study in what happens when a closely held C corporation is run as a personal checkbook and the IRS decides it is done giving the benefit of the doubt.

For owners, officers, and advisors, the opinion is a roadmap of what the government looks for when reclassifying corporate spending as constructive dividends and when pushing a case over the line into civil fraud under section 6663.

The Story: A Corporate Group Used As a Personal Piggy Bank

Albert S.N. Hee formed Waimana Enterprises, Inc. in 1988 as a holding company for several subsidiaries including Sandwich Isles Communications, Clearcom, and a captive insurer, Ho‘opa‘a Insurance Co. He was the sole shareholder and president of Waimana and also ran each subsidiary.

Instead of separating business and personal spending, Mr. Hee routinely used his personal credit cards for a wide range of charges, had the corporations reimburse him, and then deducted those charges as business expenses through the operating subsidiaries and Waimana. Trips taken by other employees went through a formal travel-review process; trips by Mr. Hee and his family were exempt from that process altogether.

An IRS examination for 2003–2012 led to a criminal referral. Mr. Hee was convicted in federal court of corruptly impeding the IRS and filing false returns for 2007–2012, receiving a 46‑month prison sentence and restitution obligations. After that conviction, the Service asserted large deficiencies and section 6663 civil fraud penalties against both the individual and the corporation for a broad range of disallowed deductions and recharacterized payments.

What the Court Disallowed: Personal Life Run Through the Company

The Tax Court walked systematically through categories of spending and explained why each failed as a business deduction and became constructive dividends to Mr. Hee.

Health, education, and family “employment”

· Massage therapy as “business expense.”
Waimana paid between $6,000 and $10,000 per year for twice‑weekly, two‑hour massages for Mr. Hee, which he said were cheaper than replacing him and were recommended by a chiropractor. The court treated these as inherently personal health costs, not deductible under section 162, and reclassified them as constructive dividends.

· MIT tuition for a child.
The company paid $33,523 to MIT for a daughter’s tuition, room, and board and booked it as “educational” and “travel” expense. Because her architecture studies were unrelated to Waimana’s telecommunications business and there was no broad educational assistance program, the court held this was purely personal and a constructive dividend.

· Salaries and benefits to children and spouse.
Waimana paid substantial salaries and retirement benefits to Hee’s children and his wife, despite the children being full‑time students on the mainland and the lack of credible evidence of actual services. The court applied heightened scrutiny to related‑party compensation, found no bona fide employment relationship, and treated those payments as benefits to the shareholder under the assignment‑of‑income doctrine. Similar reasoning applied to the wife’s purported compensation where evidence showed she was largely a stay‑at‑home parent.

Travel, entertainment, and lifestyle spending

The opinion is practically a catalog of how not to handle section 274(d) substantiation.

· Children’s airfare and family trips.
The court disallowed children’s airline tickets between college and Hawaii for lack of any documented business purpose and treated them as constructive dividends. A 2008 family “business” trip to France and Switzerland, a family trip to the 2009 presidential inauguration, a Tahiti vacation, a Walt Disney World trip, and a Hawaii resort “shareholder meeting” all failed either section 162 business‑purpose standards or the strict recordkeeping rules of section 274(d).

· Clothing, meals, and retail purchases.
A $1,246 sport coat purchased at Saks for a dinner with Raytheon executives was nondeductible because it was suitable for general wear, flunking the three‑part test for clothing expenses. Various charges at Costco, Target, Nordstrom, meals, and ATM withdrawals labeled as “office expenses” were also reclassified as constructive dividends due to missing substantiation and obvious personal character.

The Santa Clara “corporate residence”

Waimana bought a five‑bedroom house in Santa Clara, California, near Santa Clara University, supposedly to facilitate visits to a biotech investment near Menlo Park. Two of the Hee children attended Santa Clara, lived there rent‑free, rented other rooms to classmates, and kept the rent; Waimana reported no rental income.Him

The court accepted the IRS expert’s fair market rental value analysis and held that Waimana had no ordinary and necessary business reason to own the property. The fair rental value of the lodging provided to the children became constructive dividends to the parents, totaling more than $192,000 over the years at issue.

“Loans to Shareholder” That Were Really Dividends

Perhaps the most important structural issue for closely held corporations in the opinion is the treatment of over $1.1 million booked as “Loans to Shareholders.”

The court applied the familiar multi‑factor debt‑vs‑equity analysis (including the Welch factors) and focused on objective indicators:

· No promissory notes or written loan agreements for years of advances.

· No fixed repayment schedule and no collateral.

· No regular interest accruals; interest was only imputed late in the game after the CPA firm raised questions during the audit.

· Questionable ability to repay at the time of the advances.

Although Mr. Hee eventually made two large “repayments,” one of them was funded using a $1 million dividend that flowed from the captive insurer up to Waimana and then to him, undercutting the notion of genuine debt reduction.

By contrast, the same corporate group had papered and secured a real loan to a non‑shareholder employee with a note and formal terms, demonstrating that the company knew how to structure a bona fide loan when it wanted to.

Given those facts, the court found that the advances booked as shareholder loans were in substance distributions, taxable as constructive dividends to the extent of earnings and profits.

Why This Became a Fraud Case, Not Just a Big Audit Adjustment

The opinion is also significant for its expansive fraud analysis. To sustain section 6663 penalties and invoke the fraud exception to the statute of limitations under section 6501(c)(1), the IRS had to show by clear and convincing evidence both an underpayment and an intent to evade tax.

The court found multiple “badges of fraud,” including:

· Consistent, substantial understatement of income exceeding $2 million across 2004–2012.

· Inadequate records and systematic bypassing of internal travel and expense controls for the shareholder and his family.

· Implausible explanations for the business purpose of trips and the Santa Clara residence.

· Supplying incomplete and misleading information to tax preparers, including mislabeling a massage therapist as a consultant and failing to disclose family salaries and rental activity.

· Lack of credibility in trial testimony and collateral estoppel from the prior criminal conviction for filing false returns.

Because a corporation acts through its officers, the court attributed Mr. Hee’s fraudulent intent to Waimana and upheld civil fraud penalties against both the individual and corporate petitioners. The fraud finding also kept the assessment period open indefinitely for all years at issue, neutralizing what would otherwise have been powerful statute‑of‑limitations defenses.

Practical Takeaways for Closely Held Corporations and Their Advisors

For business owners and tax professionals, Waimana Enterprises provides a concrete checklist of what to do—and what to avoid.

· Draw and respect a bright line between corporate and personal spending.
Running family lifestyle costs through the company is not just an “aggressive” tax strategy; with enough volume and concealment, it can support a fraud finding and open closed years indefinitely.

· Formalize shareholder loans from day one.
Genuine loans should be documented with signed notes, stated interest at market rates, fixed maturity, and enforcement mechanisms, and they should be serviced with real payments that do not themselves come from round‑trip dividends.

· Treat family compensation like any other payroll.
For relatives, especially those away at school, maintain job descriptions, time records, and evidence of actual services, and pay reasonable amounts commensurate with work actually performed.

· Follow section 274(d) to the letter.
Travel, meals, entertainment, and mixed‑purpose trips demand contemporaneous documentation of amount, time, place, and business purpose. Without that, the Cohan rule does not rescue the deduction, and the IRS can reclassify the spending as constructive dividends.

· Give your preparers the full story—or do not expect reliance to help.
Good‑faith reliance on a tax adviser collapses if the taxpayer filters or mislabels information. Mischaracterizing personal expenses as consulting or office costs is precisely the kind of conduct courts view as evidence of intentional fraud, not mere negligence.