US DOJ Swiss Bank Program Categories 3 and 4 Comments (2/4/16; 2/7/16)

Jack Townsend once again deleted my comment on his federaltaxcrimes blog.  Having had Jack censor several of my posts is the reason I created this blog.  This blog post is a reply to Jacks inane P and C comment from this post:

US DOJ Swiss Bank Program Categories 3 and 4 Comments (2/4/16; 2/7/16)

"Let me give an example of a case where the IRS might assert the penalty. Parent (P) is a U.S. Person owning an FBAR reportable account at Swiss Bank (SB). Child (C), a U.S. citizen and resident, is a signatory and sole beneficiary of the account upon P's death. P lives in Switzerland and all of P's assets are outside the U.S. collection jurisdiction and there is no treaty requiring Switzerland to collect an FBAR penalty. Through disclosures by SB as a category 2 participant, the IRS "discovers" the existence of the account and both P's and C's relationships to the account. The IRS asserts the maximum willful penalty against P, as owner. P thumbs his nose at the IRS. Will the IRS ignore C and give C a free pass, even though the evidence (including documents and information from SB) indicates that C knew about the account and chose (i) not to answer the Schedule B question truthfully and (ii) not file an FBAR, because he was trying to protect P.Now, it is true that if the IRS waits to see if P will pay or the IRS can collect from P, the civil and criminal statutes as to C may have -- likely will have -- passed. If the IRS has reason to believe or suspect that P either not cooperate in determining the correct FBAR liability or will not pay, the IRS can investigate C and impose the penalty against C protectively. If it were to do that, it will get the penalty at least once which, under its discretion, seems to be all it wants to collect.
Moreover, of course, there are alternative ways to collect the penalty. When C is given or bequeathed assets, the IRS could use some form of transferee liability (not the Code form, but state law or other remedies).
The point simply is that, simply because I am not aware of the IRS actually directly asserting FBAR penalties against a signatory, does not mean necessarily that it will not because it certainly can if it chooses to under the statute.
Jack Townsend"

I would like to add some important background information about P and C that Jack tried to spin away with his typically sadistic "tax cheat" hunter glee:

It turns out P was born in the US while his father was on assignment in the US for 5 years for a Swiss corporation.  P moved back to Switzerland at the age of 3 with his family, and then 24 years later made the grave mistake of passing his US personhood on to C who was born in Switzerland.  24 years after that, P set up this account at SB bank for C to use while attending University to get advanced degrees while studying Cancer.  P had paid all his Swiss taxes on the money put into this account and all of the income had been earned in Switzerland.  P had even signed a W-9 under the QI agreement made beween SB and the IRS, even though he had only held cash and no US securities.  

Unfortunately for P and C, SB bank and the Swiss government knuckled under to US arm twisting and violated the Swiss constitution, and sent P's private bank information to the IRS.  Since interest rates in Switzerland have been hovering at about 1% or lower for decades, it turns out that the total amount of taxes due on the account was merely $200, but the IRS decided to levy penalties of 70% of the highest amount in the account at the time.  Unfortunately for C, this bank account now had only 60% of the funds left, and C was forced to quit his studies in order to raise money to pay the IRS penalties.  P was unable to help C in this matter because he had been financially ruined and could not even pay is IRS penalties due to the phantom gains on the sale of his house and the exorbitant legal fees charge by his tax compliance vulture lawyer.  His house had appreciated very little in value in Swiss franks, but due to the near doubling of the Swiss frank over the US dollar over the 20 years, his father faced a IRS tax bill of $150,000 for capital gains on this home sale alone.  And that didn't include the other penalties P had had to pay for his other bank accounts.  All this despite the fact that in the end, P had only owed the IRS $1000 on income.  This $1000 would have actually have been a gain for P due to tax credits, but due to quirks in IRS regulations on the Statute of Limitations, the SOL for his tax credits had run out long before the SOL on his income tax returns and FBAR's.

In case any readers of federaltaxcrimes thinks this is hyperbole, they should consider the case of the Swedish PhD researcher and father of two, who hadn't lived in the US since attending Cal Poly 20 years prior, who recently committed suicide due to what and only be described as IRS vindictiveness.  You can read about it here.

This poor Swedish man was driven to suicide by IRS demands such as these:  

"The “bank accounts” that I must report to the US government include life insurance policies, telephone prepaid cards, my customer card at the supermarket and my lunch card at work. The latter three must be reported, along with their highest balance (try to calculate that on a supermarket rebate card) all because they fit the definition of a debit card. All of this under threat of a penalty of USD 10,000 per account if I make a mistake in reporting. I think the most my lunch card has ever had on it was USD 60."

Now lets talk about another well known IRS case: Turbo Tax Timothy Geitner, who was allowed to become Secretary of the Treasury (and therefore big boss of the IRS) even after it turned out that he had was a tax criminal.  He got off with $0.00 in penalties:

"At the Senate confirmation hearings, it was revealed that Timothy Geithner had not paid $35,000 in self-employment taxes for several years, even though he had acknowledged his obligation to do so, and had filed a request for, and received, a payment for half the taxes owed. The failure to pay self-employment taxes, in part due to the way his employer reported his wages which was not in accordance with tax law, was noted during a 2006 audit by the Internal Revenue Service (IRS), in which Geithner was assessed additional taxes of $14,847 for the 2003 and 2004 tax years. Geithner also failed to pay the self-employment taxes for the 2001 and 2002 tax years (for which the statute of limitations had expired) until after Obama expressed his intent to nominate Geithner to be Secretary of Treasury. He also deducted the cost of his children’s sleep-away camp as a dependent care expense, when only expenses for day care are eligible for the deduction.Geithner subsequently paid the IRS the additional taxes owed, and was charged $15,000 interest, but was not fined for late payment."

And this is where Jack's statement at the beginning of the comment really galls, the IRS might...but it does not mean that it will.

If we look at other cases involving PEP's, we find virtually NO prosecutions of the 1% or members of the deep state.  These guys (Bill Gates, George Soros, etc) have bank accounts and properties around the world, and yet the only really big fish the IRS can seem to be able to find are Russian Oligarchs and Wesely Snipes.  To paraphrase Leona Helmsely:  "Only the little people have to worry about IRS compliance".