We now reach what is presumably the final chapter for that tax scam known as the Ultimate Tax Plan or sometimes the Advanced Legacy Plan. Readers of my last article on the subject, The Ultimate Tax Plan Leads To Ultimate Guilty Plea By Mike Meyer (Jan. 24, 2024), will recall that this is a scheme whereby taxpayers would donate interests in their operating businesses to bogus charities run by Michael L. Meyer of Davie, Florida, and the bogus charities would soak up their income tax distributions (but not, of course, the cash distributions) until some future date when the taxpayers would repurchase their interests at a deep discount. To achieve this result, documents were backdated and false income tax returns were prepared and filed.
The two primary promoters of the Ultimate Tax Plan, being Meyer and a financial planner by the name of Rao Garuda, plead guilty to various charges and the U.S. Department of Justice has recently issued a couple of press releases describing the sentences they have now received, being Florida Attorney Sentenced to 8 years in Prison in Fraudulent Charitable Contribution Tax Scheme (April 10, 2024) (Meyers) and Ohio Financial Planner Sentenced to Prison for Promoting an Illegal Charitable Contribution Tax Shelter (April 16, 2024) (Garuda).
Meyer has received an 8-year sentence plus three years of supervised release, with criminal monetary restitution to be determined later. Garuda received a 20-month sentence with three years of supervised release, and must pay a little over $1.5 million in restitution. Suffice it to say that Meyer and Garuda will also likely lose any professional licenses they held and will be unlikely to reacquire those licenses for a very long time, if ever.
Note that this not the complete end to this story, as there will likely be quite a bit of subsequent litigation by taxpayers who got dinged by this deal against their professional advisers who referred them to Meyer and Garuda. There is a lesson here for planners: Don’t refer your clients to somebody running a “too good to be true” deal, or you will likely have to make up for their losses yourself
All this brings me to a quick word about financial planners and taxes. While it is true that financial planners must have some very basic knowledge about taxes, such as that some life insurance or annuity products and certain retirement plans are exempt from taxes, they typically have utterly no solid knowledge of tax law beyond these basics. Thus, whenever a financial planner starts talking about an unusual tax strategy, you had better put your hand firmly on your wallet until you can get an independent tax attorney (not one recommended by the financial planner but one you find yourself) to review it and give you a second opinion. It is important to realize that the regulators of financial professionals do not typically delve into whether financial professionals are engaged in giving tax advice, much less the quality of that advice, since it is not supposed to be in their wheelhouse in the first place. Thus, that Garuda as a financial planner was promoting a tax scheme should have by itself been a bright red flag to everybody involved.
In fact, whenever somebody is offered to participate in some unusual or “advanced” tax strategy, prudence demands that they should seek an independent second opinion. Any sober tax attorney here would have immediately seen through this scheme and warned potential clients from getting involved with it. Greed, however, is a very powerful motivator. We have seen time-after-time with sham tax deals that the taxpayer participants really didn’t want to know how sound the scheme was, but rather they just wanted the benefits. If the promised tax savings are big enough, there will always be some folks who will turn Nelson’s blind eye to the red flags, the brightest of which is usually that these deals are indeed “too good to be true”. The last thing these folks want is for somebody to tell them that these savings are illusory. These are also the same folks who will later complain about being scammed, although at the time they should have seen it coming a mile away and had ample opportunity to get that critical second opinion.
As here.
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