Federal Court Bars Three From Promoting 'Sham Trust' Tax Scam

The Justice Department announced last week that a federal court in Florida has permanently barred Fred J. Anderson and Deborah A. Martin, of Lehigh Acres, Florida; and Richard A. Walters, of Arlington, Texas, from promoting sham trust tax schemes or any other tax fraud scheme.

The court also barred Martin, a tax return preparer, from preparing returns for customers that assert unrealistic positions. The court in January barred Tax Strategies, Inc., a company the three defendants ran, from promoting sham trust or other tax fraud schemes.

The court also barred the individuals from selling any type of asset-protection device—including trusts, limited

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liability companies or corporations, private foundations, or similar arrangements—that advocates or facilitates tax evasion or noncompliance with income tax laws.

According to court filings, the defendants helped customers establish sham charitable foundations, trusts, and corporations that customers used illegally to eliminate or reduce their reported federal tax liabilities by claiming improper deductions. Court papers identified improper deductions claimed for non-deductible personal items such as groceries, residential landscaping and cable television bills, pet expenses, and a hammock and flag pole at a customer’s house. The government alleged that the defendants’ conduct cost the federal Treasury more than $7.5 million.

“People who claim that trusts, foundations, or other entities can transform personal expenses into tax deductions are leading you down a path to serious trouble,” said Eileen J. O’Connor, Assistant Attorney General for the Department of Justice’s Tax Division. “Stopping the promotion and use of such scams is a high priority for the Tax Division of the Justice Department.”

Evan J. Davis and LaQuita Taylor-Phillips, trial attorneys with the Justice Department’s Tax Division, represented the government in this case, which George Ventura and Arthur Brake, of the IRS’s Small Business/Self-Employed Division, investigated.

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