• Monte Silver, Tax lawyer

American Professor Pleads Guilty to Defrauding the I.R.S. by Submitting False Expatriation Statement

American Professor Pleads Guilty to Defrauding the I.R.S. by Submitting False Expatriation Statement

Paid $100 million penalty and faces up to 5 years prison

Many Americans giving up their U.S. citizen and green cards (expatriate) to avoid U.S. taxes. However, the U.S. imposes a draconian exit tax on those with a net worth of over $2M who seek to expatriate. One of the conditions to expatriate is for the person to submit Form 8854 - an Expatriation Statement – that requires the person to detail his/her assets and net worth. This form is signed under penalty of perjury. Many times the question arises as to whether an expatriation solves historic bad-acts. The following case clearly answers that question in the negative.

A New York professor recently pleaded guilty to defraud the I.R.S. by submitting a false expatriation statement. According to court documents, Dan Horsky, 71, is a citizen of the United States, the U.K. and Israel. Beginning in 1995, he began investing in numerous start-ups through foreign banks accounts. The accounts were created in the name of entities, to avoid disclosure.

One investment resulted in a huge exit, netting him $80M of which he disclosed $7M. By 2013, his investments reached a value of $200M!!! Yet despite his wealth, he concealed the funds abroad and failed to report income.

Though an extremely smart investor, Horsky was somewhat foolish when it came to covering his tracks. For years, all the communications regarding his investments were conducted directly between him and the foreign banks. In 2011, Horsky gave another individual signature power over his foreign banks and this individual assumed the responsibility of managing the accounts, all in attempt to conceal Horsky’s interest in the accounts. In 2013, the two individuals conspired to help Horsky give up his citizenship to avoid disclosure of the accounts to the IRS.

In 2014, he filed false Form 8854 that failed to disclose his true net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations. He also intentionally filed false 2008 through 2014 tax returns and failed to comply with FBAR obligations.

Ultimately, the I.R.S. discovered Horsky. “The IRS is receiving a tremendous amount of information from a wide variety of sources, and we are using that information to pursue and prosecute individuals like Mr. Horsky. You can’t hide from the IRS,” said U.S. Attorney Boente. “Horsky went to great lengths to hide assets in secret accounts overseas in order to avoid paying his share of taxes to the IRS. Today’s plea shows that we will continue to prosecute those who engage in this criminal activity.”

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