The Tax Times: TC Finds Fla Man Liable For Fraud Penalty For Not Disclosing Foreign Account

Thursday, September 15, 2022

TC Finds Fla Man Liable For Fraud Penalty For Not Disclosing Foreign Account

According to Law360, a Florida man's estate is liable for fraud penalties after the U.S. Tax Court found on September 14, 2022 that he failed to disclose over $1 million to the IRS, used foreign bank accounts to conceal funds and filed false tax forms.

The estate of Brett L. Clemons Sr. owes fraud penalties under Internal Revenue Code Section 6663, the Tax Court said in a memorandum opinion, finding he tried to swindle the Internal Revenue Service from 2003 through 2009 by failing to report income and filed misleading documents with the agency. The court largely affirmed the assessments the IRS made against Clemons, which included nearly $455,000 in taxes, according to the opinion.

That he failed to work with the IRS while it examined his taxes and relied on foreign bank accounts also indicates that he intended to commit fraud, the court said.

"Mr. Clemons' choice to open Swiss bank accounts with secretive features provides ample evidence of concealment," the opinion said.

Clemons died in 2021 after the Tax Court held a trial in his case. The IRS had assessed taxes against him for 2003 through 2009 based mostly on undisclosed income the agency had determined based on deposits in his bank account, according to the opinion.

It Also Assessed Nearly $322,000 In Fraud Penalties
Under Section 6663, According To The Opinion.

In 2001, Clemons opened his first account in Switzerland that he used to conceal income from the IRS, and he used several accounts overseas over the years to hide income that he never reported on his income tax returns, according to the opinion.

He failed to disclose the existence of those accounts on the annual Report of Foreign Bank and Financial Accounts form that he was obligated to file, and he also filed his tax returns late, according to the opinion.

Among the Tax Court's findings were that Clemons couldn't retroactively change the treatment of his passive foreign investment company income, that he couldn't deduct various expenses connected with his employment with Hewlett-Packard U.S., and that he wasn't entitled to various Schedule C deductions and the foreign tax credit. It also rejected arguments that the IRS was too late to assess taxes against Clemons.

The typical three-year deadline for assessing taxes doesn't apply when a person files fraudulent returns, and the agency has proven that Clemons' actions were fraudulent, according to the opinion.

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