Prohibition of CRAT Based Illegal Tax Scheme Sought by the Justice Department

John Hugo Eickhoff Jr., Rhonda Kaye Eickhoff, Hoffmann Associates LLC, Aric Elliot Schreiner, Columbia CPA Group LLC, John Williams Gray II and Damon Thomas Eisma have recently been proceeded against by the Justice Department which is seeking to bar them from organizing or promoting or selling an allegedly unlawful tax scheme involving the use of CRATs, or charitable remainder annuity trusts. The complaint has been filed in the U.S. District Court for the Western District of Missouri.

The scheme sought to be prohibited claims, falsely as per the filed complaint, that federal income tax can be avoided on income generated from the sale of a property, if their CRAT scheme is followed.

The modus operandi of the scheme, again, as specified in the complaint, is:

  1. Get a CRAT contribution from a customer in the form of a property (typically one that has appreciated in value over time)
  2. Inflate (step-up) the cost basis in the property illegally
  3. Purchase annuity from the sale proceeds of the property
  4. Report annuity payments received by as tax-free distributions of income made by the CRAT, falsely

According to the complaint, the defendants have the knowledge or reason to know that the supposed tax benefits of the transaction they claim and promote are false or fraudulent.

The announcement was made by the Justice Department’s Tax Division’s Deputy Assistant Attorney General David A. Hubbert.

Taxpayers continue to be warned by the IRS to be wary of fraudsters selling schemes that deliver benefits through charitable contributions and deductions. Publications 526 and 561, available on IRS.gov, the IRS website, can be consulted for guidelines on property donations to charities and the benefits thereon. Seeking advice from tax professionals is also advised by the IRS.

Injunctions have been obtained against hundreds of promoters of tax frauds and even preparers of tax returns, by the Tax Division.

Information about the cases as well as an alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on www.justice.gov, the website of the department. If you are aware that one or more of the enjoined persons could be a violator, you are requested to contact the department through email on [email protected].

Avatar

Michael Canning

Michael has a Masters's Degree in Leadership and Juris Doctorate. After working in private business for 10 years, he started writing. He covers law, business, startups, and technology. One of his passions is researching disruptive technology in business. [email protected]

Leave a Reply

Your email address will not be published.

Newsletter Signup

Subscribe to our weekly newsletter below and never miss the latest product or an exclusive offer.