Monday, July 10, 2006

Tax Shelters - Legal or Illegal

The case related to the prosecution of the KPMG defendants may rest to some extent on the legality of the tax shelters. According to the NYTimes here an investigation in Deutsch Bank's role in some tax shelters may also present this same problem.  The added issue here is whether "advice of counsel" (claiming a legality of these shelters), renders a defense if they are proven to be improper. As this investigation unfolds - some thoughts:

  • How does one assess the intent of individuals setting up tax shelters?  Where is the line between criminal conduct and legal tax shelters?
  • In assessing the intent, should the government factor in the harm to individuals who may have suffered the ramifications of some of these tax shelters?
  • Are there some shelters that are just so blatantly fraudulent that they deserve prosecution?
  • In assessing intent, how much weight should be given to extrinsic evidence such as emails, conversations, etc. that demonstrate a desire to avoid taxation?
  • Will juries be able to understand tax shelter prosecutions, or will DOJ, to simplify cases, be focusing on extrinsic evidence that may present damaging evidence against a particular defendant?

One thing for sure - - if you are not an accountant or tax specialist, the acronyms here can be pretty confusing.  We find CARDS (Customized Adjustable Rate Debt Facility), BLIPS (Bond Linked Issue Premium Structure), FLIPS (Foreign Leverages Investment Program), etc.


Investigations, Tax | Permalink

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