Run with the tax dodgers and you can expect to get bitten
3.11.01   Don Bauder SD UT

Even though its powers have diminished, the IRS watches the promoters of sleazy offshore schemes. Usually, you can find them putting on seminars, as well as putting garbage on Web sites. If they provide services to you, and they get caught, watch out; you might be next. The IRS is on the lookout for abusive domestic as well as foreign trusts. Promoters may charge $5,000 to $70,000 for these packages. Trusts can be perfectly legitimate, of course, but many of the dubious ones are vertically layered, with each trust distributing income to the next layer. "Bogus expenses are charged against trust income at each trust layer," the IRS says. That fraudulently reduces taxable income to nominal amounts.
In abusive domestic and foreign trusts, taxpayers are told to create an asset management company. The next step is to form a business trust, of which the company is trustee. In a domestic scheme, the company and the business trust might be followed by an equipment or service trust, which holds equipment that is rented or leased to the business trust at inflated rates. There also can be family residence and charitable trusts. Tax dodgers using the former may try to deduct non- allowable depreciation and the expenses of maintaining & operating the residence, such as gardening, pool service and utilities. The charitable trust pays for personal, educational or recreational expenses on behalf of the taxpayer, and the payments are falsely claimed as charitable deductions.

Offshore trusts also begin with the asset management company and business trust, but those will be followed by two foreign trusts. Income from the business trust is dumped into the first, and then into the second. Because there is a foreign trustee, promoters of such schemes say the income is foreign, and there are no U.S. filing requirements. And because the trusts are in a tax haven, it is impossible for the IRS to determine who controls the trusts, the promoters say. But, IRS criminal investigators are focusing on promoters and the tax evaders. And, although the number of cases they bring is declining, many folks still go to prison. "Don't ever trust your money to anybody but yourself, or a well-regulated bank or trust company," Adkisson says. "And don't try to hide your money from the IRS; life is too short for the grief of worrying about this."
There are all manner of tax protesters, hate-radio talk show hosts, Common Law Movement wackos and others who will tell you that the 16th Amendment to the Constitution (establishing the income tax) was not properly ratified; that the Internal Revenue Code does not define "income," ad nauseam. Such arguments are fallacious, says Daniel B. Evans, who also has a Web site. It's true that only four states approved the 16th Amendment exactly as Congress had worded it; the other states made slight errors of diction, capitalization, punctuation and spelling. But the argument is nonsense, Evans says. The amendment was ratified. Similarly, the Internal Revenue Code defines gross income, citing examples of it. Taxable income is calculated from gross income. …

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