The Tax Times: Current US Resident Ordered To Repatriate $17.9M For FBAR Violations

Thursday, March 30, 2023

Current US Resident Ordered To Repatriate $17.9M For FBAR Violations - What Next?

On January 9, 2023 we posted An Expatriating Taxpayer, With FBAR Penalties, May Create New Precedent For Collection Outside the US? - Don't Think So! where we discussed a Floridian who moved his assets offshore and sold him house in the wake of an $18 million penalty for failing to report foreign bank accounts, the U.S. should be allowed to seize the overseas funds, the U.S. told a Florida federal court on January 6, 2023. Isac Schwarzbaum has not paid any amount he owes, forcing the U.S. to repatriate the funds he has deposited in several Swiss banks, the U.S. said in a motion to repatriate foreign assets.

Now according to Law360, he has been ordered to transfer enough money from his overseas accounts to cover the debt, a Florida federal judge ruled, rejecting the man's arguments the court lacked authority to order the repatriation.

Isac Schwarzbaum, A Dual U.S.-German Citizen,
Must Transfer The Money Into A U.S. Bank Account
In His Name By April 28,
U.S. District Judge Beth Bloom Ordered.

While Schwarzbaum had argued the court lacked authority to order the money transfer while his appeal of the judgment in the Eleventh Circuit is pending, Judge Bloom said an appeal alone does not automatically pause the enforcement of a judgment. Further, Schwarzbaum never asked the court for a stay, Judge Bloom said.

"Absent The Entry of a Stay, a District Court Retains Jurisdiction — Via Contempt Or Other Means — To Enforce Its Judgment During The Pendency Of An Appeal,"
Bloom Said In The Order.

The government asked the court for the repatriation order in January, alleging Schwarzbaum "has no intention" of paying the court's judgment. Judge Bloom found that he owed over $17.9 million — including interest and late-payment penalties — for willfully failing to file foreign bank and financial account forms.

According to the government, Schwarzbaum sold his home in Florida in June 2020, less than three months after Judge Bloom concluded that he showed reckless conduct that amounted to a willful failure to file FBARs for 2007 through 2009. After "fleeing the country," Schwarzbaum has kept no assets in the U.S., yet reported to the government in 2021 that he had more than $37 million in three Swiss banks, according to the government.

Schwarzbaum argued it was improper for the court to rule on the merits of the government's motion for repatriation while his appeal was pending. Further, he claimed he couldn't repatriate assets that were never originally in the U.S. He also rejected the government's allegations that he fled the country or aimed to render himself judgment-proof, saying he "lives a highly mobile lifestyle, never living in the United States full time."

Judge Bloom said Tuesday that the court already had struck down Schwarzbaum's argument that the assets needed to have originated in the U.S. to qualify for repatriation. The court also rejected Schwarzbaum's argument that only outstanding tax liabilities are subject to repatriation.

The Question Now Is How Does The IRS
Levy On Assets Outside The US?

Against a Taxpayer Who Is No Longer AUS Resident,
Where Mr. Schwarzbaum Leaves The US?