IMPORTANT  TAX NEWS!!

IRS Suspends FBAR Filing for Non-Citizens (for Now)

WASHINGTON, D.C. (FEBRUARY 26, 2010)

The Internal Revenue Service has temporarily suspended the requirement to file a Report of Foreign Bank and Financial Accounts for the 2009 and earlier calendar years, for

people who are not U.S. citizens, residents or domestic entities.

Announcement 2010-16

temporarily suspends the requirement to file Form TD F 90-22.1, also known as the FBAR, as the IRS tries to clear up the definition of “United States person.” In addition, the IRS issued

Notice 2010-23

which provides FBAR filing relief for some persons with signature authority and who own commingled funds.In October 2008, the IRS published a revised FBAR form, together with accompanying instructions, changing the definition of “United States person.” The IRS received numerous questions and comments from the public concerning the changed definition. In response, and to reduce the burden on the public, the IRS issued Announcement 2009-51, 2009-25 I.R.B. 1105, which directed people to refer to the definition of “United States person” in the July 2000 version of the FBAR instructions to determine if they had a filing obligation. This effectively suspended the filing of FBARs due on June 30, 2009, by people who were not U.S. citizens, residents, or domestic entities. Announcement 2009-51 stated that additional FBAR guidance would be issued for subsequent filing years and invited public comments.

After receiving a significant number of public comments, the Treasury Department published proposed FBAR regulations to provide taxpayers with guidance on who is required to file FBARs due on June 30, 2010, and how to answer FBAR-related 2009 federal income tax return questions.

The IRS and the Treasury Department now believe it is appropriate to provide the following administrative relief: The requirement to file an FBAR due on June 30, 2010, is suspended for persons who are not U.S. citizens, U.S. residents, or domestic entities. Additionally, all persons may rely on the definition of “United States person” found in the July

2000 version of the FBAR instructions to determine if they have an FBAR filing obligation for the 2009 and earlier calendar years. The definition of “United States person” there is:

(1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust.

This substitution of the definition of “United States person” applies only with respect to FBARs for the 2009 calendar year and to earlier calendar years.

All other requirements of the 2008 version of the FBAR form and instructions, as modified by Notice 2010-23, remain in effect until changed by subsequent guidance issued by the Treasury Department, including the IRS.

At Chapman Glucksman Dean Roeb &

Barger, we’ve built a practice around the needs of accounting firms throughout the United States, offering representation and advice regarding a wide variety of risk management, compliance and regulatory matters successfully defending clients in, among other things, Board of Accountancy, AICPA, SEC, and PCAOB investigations

(See http://www.webcpa.com/ for more information.)

 “The Internal Revenue Service will extend until October 15, 2009 the ability of Americans with undeclared offshore accounts at UBS AG and other banks to avoid criminal prosecution and some fines if they disclose their holdings. Americans with large undeclared offshore accounts have been under growing pressure since Switzerland agreed on August 19, 2009 to hand over data to the U.S. on as many as 52,000 accounts. The IRS says it expects to handle as many as 10,000 cases related to the matter and about half will come from the voluntary disclosure program.  On March 26, the IRS announced a six-month voluntary disclosure program that requires people with income in undeclared bank accounts to amend six years worth of tax returns and pay back taxes and some penalties. Those who come forward may be able to avoid criminal prosecution and the IRS may seize smaller amount of an account’s assets that it would be entitled to otherwise under the law.  The IRS can confiscate the higher $100,000 or 50 percent of an offshore account’s value when the holder deliberately doesn’t disclose the account to Treasury. The penalty can apply each year the form isn’t filed, so after three years of noncompliance the account holder can owe 150 percent of the account’s value. Under the IRS program announced in March, the tax agency will take 20 percent of the account’s assets based on its peak value in the previous six years. In cases where the accounts were inactive, the agency will confiscate as little as 5 percent.  The IRS said it won’t grant any further extensions of the disclosure program.  The IRS began the offer in March, soon after giant Swiss Bank UBS AG turned over the name of some account holders as part of a $780 million criminal settlement with the U.S. Government. it is part of a broad crackdown on tax evaders as countries hunt revenue in the global recession.  After months of tortuous negotiations that involved the Swiss government and challenged that country’s tradition of banking secrecy, UBS agreed in August to disclose the named of 4,450 American holders of secret accounts at the bank, ending a civil lawsuit.  This year’s program gas received outsize attention thanks to a dispute between the U.S. and Swiss governments over the identities of U.S. Taxpayers holding at least $10 billion in some 52,000 secret accounts at UBS. Advisers say there has been no discernible pattern as to which customers were selected, dashing the hopes of those who might  have thought they could escape scrutiny because their accounts were too small or were devoid of potential evidence of intent to evade taxes.  Officials  have set up a center in Philadelphia to coordinate the processing of these disclosures. Attorneys say it already seems to overwhelmed, and no disclosure cases appeared to have been resolved to date.  An IRS spokeswoman declined to comment on the agency’s progress.”  

(See Bloomberg.com, WSJ.com, and U.S. Reuters.com)

“DOJ SAYS IT WILL NOT DROP UBS CASE”

A deadline requiring offshore banking clients to file a foreign bank account report (commonly referred to as an FBAR) is June 30th.  The IRS voluntary disclosure program deadline  for offshore accounts is September 23, 2009. 

YEAGER v. UNITED STATES

 
SUPREME COURT OF THE UNITED STATES, 2009 U.S. LEXIS 4538

June 18, 2009, Decided

 
Following an acquittal on fraud and securities fraud charges and a mistrial on insider trading and money laundering charges under 15 U.S.C.S. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b5-1, and 18 U.S.C.S. § 1957, defendant was recharged with some of the mistriedcounts. Defendant moved to dismiss. The district court denied the motion, and the United States Court of Appeals for the Fifth Circuit affirmed. The Supreme Court granted certiorari.

Defendant was accused of making false and misleading statements about a corporation’s product development. He allegedly sold more than 700,000 shares of the corporation’s stock at prices inflated by the alleged deception. The jury hung on the insider trading and money laundering counts. Defendant argued that his acquittals on the fraud and securities fraud charges precluded his retrial on the insider trading and money laundering charges under the issue-preclusion component of the Double Jeopardy Clause of the Fifth Amendment. The Fifth Circuit determined that the jury must have found that defendant did not have any insider information and that a conflict between the acquittals and the hung counts barred the application of issue preclusion. The Supreme Court held that the hung counts should not have been considered in the issue-preclusion analysis. If possession of insider information was a critical issue of ultimate fact in all of the charges against defendant, a jury verdict that necessarily decided that issue in his favor would protect him from further prosecution. On remand, the Fifth Circuit could reconsider whether the acquittals necessarily decided that issue.

The Fifth Circuit’s judgment was reversed, and the matter was remanded for further proceedings. 6-3 Decision; 1 Concurrence in Part; 2 Dissents.

The indictment charged petitioner with money laundering for conducting various transactions with the proceeds of his stock sales. The jury acquitted Yeager on the fraud counts but failed to reach a verdict on the insider-trading and money-laundering counts. After the Government recharged him with some of the insider-trading and money-laundering counts, Yeager moved to dismiss the charges on the ground that the jury, by acquitting him on the fraud counts, had necessarily decided that he did not possess material, nonpublic information about the project’s performance and value, and that the issue-preclusion component of the Double Jeopardy Clause therefore barred a second trial for [*2] insider trading and money laundering. The District Court denied the motion, and the Fifth Circuit affirmed, reasoning that the fact that the jury hung on the insider-trading and money-laundering counts — as opposed to acquitting petitioner — cast doubt on whether it had necessarily decided that petitioner did not possess material, nonpublic information. This inconsistency between the acquittals and the hung counts, the Fifth Circuit concluded, meant that the Government could prosecute petitioner anew for insider trading and money laundering.

Held: An apparent inconsistency between a jury’s verdict of acquittal on some counts and its failure to return a verdict on other counts does not affect the acquittals’ preclusive force under the Double Jeopardy Clause.

This case is controlled by the reasoning in Ashe v. Swenson, 397 U.S. 436, 90 S. Ct. 1189, 25 L. Ed. 2d 469, where the Court squarely held that the Double Jeopardy Clause precludes the Government from relitigating any issue that was necessarily decided by a jury’s acquittal in a prior trial. For double jeopardy purposes, the jury’s inability to reach a verdict on Yeager’s insider-trading and money-laundering counts was a nonevent that should be givenno weight in the issue-preclusion analysis. To identify what a jury necessarily determined at trial, courts should scrutinize the jury’s decisions, not its failures to decide. A jury’s verdict of acquittal represents the community’s collective judgment regarding all the evidence and arguments presented to it. Even if the verdict is “based upon an egregiously erroneous foundation,” Fong Foo v. United States, 369 U.S. 141, 143, 82 S. Ct. 671, 7 L. Ed. 2d 629, its finality is unassailable, see, e.g., Arizona v. Washington, 434 U.S. 497, 503, 98 S. Ct. 824, 54 L. Ed. 2d 717. Thus, if the possession of insider information was a critical issue of ultimate fact in all of the charges against Yeager, a jury verdict that necessarily decided that issue in his favor protects him from prosecution for any charge for which that is an essential element.

Neither Richardson v. United States, 468 U.S. 317, 104 S. Ct. 3081, 82 L. Ed. 2d 242, nor United States v. Powell, 469 U.S. 57, 105 S. Ct. 471, 83 L. Ed. 2d 461, supports the Government’s argument that it can retry Yeager for insider trading or money laundering. Richardson’s conclusion that a jury’s “failure . . . to reach a verdict is not an event which terminates jeopardy,” 468 U.S., at 325, 104 S. Ct. 3081, 82 L. Ed. 2d 242, did not open the door to using a hung count to ignore the preclusiveeffect of a jury’s acquittal, but was simply a rejection of the argument — similar to the Government’s today — that a mistrial is an event of significance. Also rejected is the contention that an acquittal can never preclude retrial on a hung count because it would impute irrationality to the jury in violation of Powell’s rule that issue preclusion is “predicated on the assumption that the jury acted rationally,” 469 U.S., at 68, 105 S. Ct. 471, 83 L. Ed. 2d 461. The Court’s refusal in Powell and in Dunn v. United States, 284 U.S. 390, 52 S. Ct. 189, 76 L. Ed. 356, to impugn the legitimacy of jury verdicts that, on their face, were logically inconsistent shows, a fortiori, that a potentially inconsistent hung count could not command a different result.

The Government has argued that, even if hung counts cannot enter the issue-preclusion analysis, Yeager has failed to show that the jury’s acquittals necessarily resolved in his favor an issue of ultimate fact that must be proved to convict him of insider trading and money laundering. Having granted certiorari on the assumption that the Fifth Circuit ruled correctly that the acquittals meant the jury found that Yeager did not have insider information that contradicted what was presented to the public, this Court declines to engage in a fact-intensive analysis of the voluminous record that is unnecessary to resolve the narrow legal question at issue. If the Court of Appeals chooses, it may revisit its factual analysis in light of the Government’s arguments before this Court.

Reversed and remanded.

BAKERSFIELD ENERGY PARTNERS, LP, ROBERT SHORE, STEVEN FISHER, GREGORY MILES, SCOTT MCMILLAN, PARTNERS OTHER THAN THE TAX MATTERS PARTNERS, Petitioners-Appellees,

v.

 COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.

The IRS generally has three years after a return is filed to assess a tax deficiency, but it has six years to do so when the return “omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return.” . 26 U.S.C. §6501(a),(e)(1)(A). This case requires us to decide whether the IRS can use this extended six-year limitations period to assess a deficiency where a taxpayer has overstated its basis in an asset and thereby lowered the amount of gross income reported in its return. In other words, does a taxpayer “omit [] from gross income an amount properly includible therein” for purposes of § 6501(e)(1)(A) by overstating its basis? We conclude, like the Tax Court below, that we are bound by Colony, Inc. v. Comm’r, 357 U.S. 28, 33, 78 S. Ct. 1033, 2 L. Ed. 2d 1119, 1958-2 C.B. 1005 (1958), which held that a taxpayer’s overstatement of basis does not “omit[] from gross income an amount properly includible therein” for purposes of § 6501(e)(1)(A). Accordingly, the IRS had only three years to assess the tax deficiency at issue in this case, and it failed to do so. We therefore affirm the Tax Court’s judgment in favor of the taxpayer.

FIRST TAX FRAUD CASE
FROM UBS RESULTS IN GUILTY PLEA

Accountant Michael Rubinstein, an accountant from Boca Raton, Florida entered a plea of guilty to wilfully filing false and fraudulent U.S. Income Tax Returns (Form 1040) for the 2007 tax year in United States v. Steven M. Rubinstein, case number 09-6116-BSS.

On February 18, 2009 as part of a deferred prosecution agreement entered between UBS (Switzerland’s largest bank) and the United States, UBS admitted that it conspired with certain U.S. customers to aid them to evade U.S. Income Taxes.

UBS agreed to turn over bank records of 250 to 300 of its U.S. Customers to the IRS. UBS obtained notice this would be permitted under Swiss law. However, the IRS is suing UBS to produce all bank records of all of its U.S. customers. It is estimated that there are over 50,000 people that may be affected. UBS has stated that this would violate Swiss bank secrecy laws.

Rubinstein’s records were produced to the IRS by UBS as part of the agreed production. He is believed to be the first criminal case brought as a result of the records produced by UBS. The complaint alleged that from 2001 through 2008 Rubinstein transferred millions of dollars through various UBS accounts using offshore corporations formed for the purpose to evade U.S. taxes.

The complaint was filed against Rubinstein on April 1, 2009. A one count information was filed on June 23, 2009. The plea was entered on June 24, 2009. Sentencing is scheduled before Judge Marcia G. Cooke in Miami, Florida on September 30, 2009 at 11:00 a.m.

There is wide spread speculation that many more indictments will follow especially from the records UBS produced on the 250 to 300 customers to the IRS under it deferred prosecution agreement. Many taxpayers who are not on that list are scrambling to participate in what is commonly referred as to Voluntary Compliance Program by filling Amended Returns in an effort to avoid criminal prosecution.

Any person considering voluntary compliance should contact a qualified criminal tax attorney.

IRS VOLUNTARY DISCLOSURE UBS
AND RELATED MATTERS

Jan. 25 (Bloomberg) — A Florida man was charged by U.S. prosecutors with filing a false tax return for 2007 that failed to disclose hisSwiss accounts at UBS AG and income he earned on them.

Jack Barouh, a resident of Golden Beach, Florida, was charged in federal court in Miami through a criminal information, which typically precedes a guilty plea. Six U.S. clients of UBS, the largest Swiss bank, pleaded guilty to tax crimes last year.

The charge filed today does not provide details about Barouh, who faces up to three years in prison, or the nature of his account. The case was assigned to U.S. District Judge Adalberto Jordan in Miami, court records show.

UBS avoided U.S. prosecution on Feb. 18 by admitting it aided tax evasion, paying $780 million, and handing over data on 255 accounts. The U.S. sued in federal court in Miami to obtain data on thousands of other accounts. UBS settled that case on Aug. 19 by agreeing to turn over information on 4,450 accounts involving “tax fraud or the like.”

Assistant U.S. Attorney Jeffrey Neiman, who filed the charge today, declined comment. Barouh didn’t immediately return a phone message left at an ocean-front home listed in his name.

U.S. prosecutors are combing through data on the 255 accounts covered by the criminal investigation of UBS and have said they opened 150 criminal tax investigations. Beyond the six clients who pleaded guilty, several European financial professionals were indicted in the U.S.

Former UBS banker Bradley Birkenfeld, a key informant in the U.S. investigation of offshore tax evasion aided by the bank, reported on Jan. 8 to a federal prison in Pennsylvania to start a 40-month term that he said was unfair.

The case is United States of America v. Jack Barouh, 10-cr-20034, U.S. District Court, Southern District of Florida (Miami).