John R. Bullis: Poor Sam Wyly owes IRS | NevadaAppeal.com

John R. Bullis: Poor Sam Wyly owes IRS

John R. Bullis

Most folks know that our tax rules require reporting of worldwide income. Now special forms are required to disclose foreign financial assets (Form 8938 and FinCEN 114).

If the taxpayer does not live abroad, if the total value of foreign financial assets on the last day of the year is more than $50,000 for a single person or $100,000 for a married couple filing a joint return, Form 8938 is required to be filed.

The law also now requires foreign banks and other financial institutions to report directly to IRS some information about financial accounts held by US taxpayers. IRS has been using that information to try to determine if a taxpayer failed to report all their income and still owes income tax on that income.

Sam Wyly has been found to have committed income tax fraud. He and his brother Charles (who is now deceased) had done a series of transactions to move money offshore. It seems now they failed to report and pay income taxes on over $1 billion. They used a system of offshore trusts and corporations that the court found “enormously complex.”

It was discovered in a Securities and Exchange Commission case. IRS paid attention and did the audit to have a chance to recover the taxes and penalties before the money was all gone or otherwise not available.

Sam said he relied on lawyers and accountants to set up the offshore trusts and he knew few details about how the trusts were operated. The judge said, “To accept Wylys’ explanation requires the court to be satisfied that it is appropriate for extraordinarily wealthy individuals to hire middlemen to do their bidding in order to insulate themselves from wrongdoing so that, when the fraud is ultimately exposed, they have plausible deniability …”

The judge said Sam was guilty of income tax fraud.

The judge found the various entities set up in places like Isle of Man and the Cayman Islands to hide the sales of companies was a pattern of behavior that went on for more than 10 years.

In 2014 a jury found fraud and a judgment against Sam was for more than $123,836,958 in the SEC case. His brother’s estate had a judgment of $63,881,743. In April 2015, IRS gave Sam a tax bill worth about $2 billion, including back taxes, penalties and interest.

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.