Several promoters of abusive tax shelters in the U.S., which allegedly used a complex web of sham trusts to help clients evade US$40 million worth of income tax, have been convicted on fraud charges in Colorado.
A federal jury convicted four promoters of a “layered” tax trust shelter scheme that targeted high-net-worth investors.
According to court filings, the scheme used a series of trusts — a business trust, family trust, charitable trust and private family foundation — to evade federal income taxes on upwards of 98% of their business profits, in part by claiming tax deductions for personal living expenses and fraudulent charitable contributions.
The tax shelters, which cost between US$25,000 and US$50,000 to set up, were marketed to investors through seminars around the country.
The promoters — Marcia Predmore, Roderick Prescott, Suzanne Thompson and Weldon Wulstein — were convicted of conspiracy to defraud the U.S. government in connection with the scheme.
According to U.S. authorities, Predmore, a registered life insurance agent, promoted the tax shelter to clients along with her spouse, Timothy McPhee — who was sentenced to 151 months in prison last year after being convicted for conspiracy, tax evasion and wire fraud for his role in this scheme and a separate investment fraud scheme. Along with the conspiracy charge, Predmore was also convicted of six counts of tax evasion.
U.S. authorities said Wulstein, a registered accountant, prepared false tax returns for clients who purchased the tax shelter, along with Thompson, who operated a bookkeeping firm and prepared financial statements for the clients’ trusts. They were also convicted of six counts each of assisting in the preparation of false tax returns.