BenistarAudits.com
Benistar
Benistar 419 Plan
Grist Mill Trust
Nova
Niche
Sea Nine Veba
SADI Trust
Beta 419
Millennium
Bisys
Creative Services Group
Sterling Benefit Plan
Compass 419
Niche 419
CRESP
American Benefits Trust
National Benefit Plan and Trust
ABT
Professional Benefits Trust
Old Mutual
Allmerica Financial
American Heritage Life
Commercial Union Life
National Life of Vermont
Old Line Life
Security Mutual Life
West Coast Life
ECI Pension Services
Pension Professionals of America
ABI
Hartford
AIG
Indy Life
Indianapolis Life
Advantage
Jacksom National
Jefferson-Pilot Life
Lincoln Benefit Life
Lincoln National Life
Manufacturers Life
Massachusetts Mutual
Metropolitan Life
Midland Life
Minnesota Mutual
Principal Life
Reliastar
Security Mutual
USG Annuity & Life
Western Reserve Life Assurance
Old Mutual
Allmerica Financial
American Heritage Life
Commercial Union Life
National Life of Vermont
Old Line Life
Security Mutual Life
West Coast Life
For Help With Any of These:
Call 516-938-5007


For more articles on this subject and closely
related topics go to any of these websites:

listedtransactions.com
reportabletransaction.com
section79plan.org
IRS6707Apenalty.com
IRSform8886.com
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United States District Court,
District of Massachusetts

IANTOSCA LLC v. STEP
PLAN SERVICES INC 419 LLC

Prejudgement Summary

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Court Case Research

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accountingTODAY

The dangers of being "listed"
A warning for 419, 412i, Sec.79 and captive insurance

Accounting Today: October 25, 2010
By: Lance Wallach

Taxpayers who previously adopted 419, 412i, captive insurance or
Section 79 plans are in big trouble.

In recent years, the IRS has identified many of these arrangements as
abusive devices to funnel tax deductible dollars to shareholders and
classified these arrangements as "listed transactions."

These plans were sold by insurance agents, financial planners,
accountants and attorneys seeking large life insurance commissions. In
general, taxpayers who engage in a "listed transaction" must report
such transaction to the IRS on Form 8886 every year that they
"participate" in the transaction, and you do not necessarily have to
make a contribution or claim a tax deduction to participate.  Section
6707A of the Code imposes severe penalties ($200,000 for a business
and $100,000 for an individual) for failure to file Form 8886 with
respect to a listed transaction.

But you are also in trouble if you file incorrectly.  

I have received numerous phone calls from business owners who filed
and still got fined. Not only do you have to file Form 8886, but it has to
be prepared correctly. I only know of two people in the United States
who have filed these forms properly for clients. They tell me that was
after hundreds of hours of research and over fifty phones calls to
various IRS personnel.

The filing instructions for Form 8886 presume a timely filing.  Most
people file late and follow the directions for currently preparing the
forms. Then the IRS fines the business owner. The tax court does not
have jurisdiction to abate or lower such penalties imposed by the IRS.
Many business owners adopted 412i, 419, captive insurance and
Section 79 plans based upon representations provided by insurance
professionals that the plans were legitimate plans and were not
informed that they were engaging in a listed transaction.  Upon audit,
these taxpayers were shocked when the IRS asserted penalties under
Section 6707A of the Code in the hundreds of thousands of dollars.
Numerous complaints from these taxpayers caused Congress to
impose a moratorium on assessment of Section 6707A penalties.

The moratorium on IRS fines expired on June 1, 2010. The IRS
immediately started sending out notices proposing the imposition of
Section 6707A penalties along with requests for lengthy extensions of
the Statute of Limitations for the purpose of assessing tax.  Many of
these taxpayers stopped taking deductions for contributions to these
plans years ago, and are confused and upset by the IRS's inquiry,
especially when the taxpayer had previously reached a monetary
settlement with the IRS regarding its deductions.  Logic and common
sense dictate that a penalty should not apply if the taxpayer no longer
benefits from the arrangement.

Treas. Reg. Sec. 1.6011-4(c)(3)(i) provides that a taxpayer has
participated in a listed transaction if the taxpayer's tax return reflects
tax consequences or a tax strategy described in the published
guidance identifying the transaction as a listed transaction or a
transaction that is the same or substantially similar to a listed
transaction.  Clearly, the primary benefit in the participation of these
plans is the large tax deduction generated by such participation. It
follows that taxpayers who no longer enjoy the benefit of those large
deductions are no longer "participating ' in the listed transaction.   But
that is not the end of the story. Many taxpayers who are no longer
taking current tax deductions for these plans continue to enjoy the
benefit of previous tax deductions by continuing the deferral of income
from contributions and deductions taken in prior years.  While the
regulations do not expand on what constitutes "reflecting the tax
consequences of the strategy", it could be argued that continued
benefit from a tax deferral for a previous tax deduction is within the
contemplation of a "tax consequence" of the plan strategy. Also, many
taxpayers who no longer make contributions or claim tax deductions
continue to pay administrative fees.  Sometimes, money is taken from
the plan to pay premiums to keep life insurance policies in force.  In
these ways, it could be argued that these taxpayers are still
"contributing", and thus still must file Form 8886.

It is clear that the extent to which a taxpayer benefits from the
transaction depends on the purpose of a particular transaction as
described in the published guidance that caused such transaction to
be a listed transaction. Revenue Ruling 2004-20 which classifies
419(e) transactions, appears to be concerned with the employer's
contribution/deduction amount rather than the continued deferral of the
income in previous years.  This language may provide the taxpayer
with a solid argument in the event of an audit.  

Lance Wallach, National Society of Accountants Speaker of the Year
and member of the AICPA faculty of teaching professionals, is a
frequent speaker on retirement plans, financial and estate planning,
and abusive tax shelters.  He writes about 412(i), 419, and captive
insurance plans. He speaks at more than ten conventions annually,
writes for over fifty publications, is quoted regularly in the press and
has been featured on television and radio financial talk shows including
NBC, National Pubic Radio's All Things Considered, and others. Lance
has written numerous books including Protecting Clients from Fraud,
Incompetence and Scams published by John Wiley and Sons, Bisk
Education's CPA's Guide to Life Insurance and Federal Estate and Gift
Taxation, as well as AICPA best-selling books, including Avoiding
Circular 230 Malpractice Traps and Common Abusive Small Business
Hot Spots. He does expert witness testimony and has never lost a
case. Contact him at 516.938.5007,
wallachinc@gmail.com or visit
www.taxaudit419.com or www.listedtransactions.com.

The information provided herein is not intended as legal, accounting,
financial or any other type of advice for any specific individual or other
entity.  You should contact an appropriate professional for any such
advice.


IRS Audits Focus on Captive Insurance Plans
April 2011 Edition

By Lance Wallach

The IRS started auditing § 419 plans in the 1990s, and then continued
going after § 412(i) and other plans that they considered abusive, listed, or
reportable transactions, or substantially similar to such transactions. If an
IRS audit disallows the § 419 plan or the § 412(i) plan, not only does the
taxpayer lose the deduction and pay interest and penalties, but then the IRS
comes back under IRC 6707A and imposes large fines for not properly filing.

Insurance agents, financial planners and even accountants sold many of
these plans. The main motivations for buying into one were large tax
deductions. The motivation for the sellers of the plans was the very large life
insurance premiums generated. These plans, which were vetted by the
insurance companies, put lots of insurance on the books. Some of these
plans continue to be sold, even after IRS disallowances and lawsuits against
insurance agents, plan promoters and insurance companies.

In a recent tax court case, Curcio v. Commissioner (TC Memo 2010-115),
the tax court ruled that an investment in an employee welfare benefit plan
marketed under the name “Benistar” was a listed transaction in that the
transaction in question was substantially similar to the transaction described
in IRS Notice 95-34. A subsequent case, McGehee Family Clinic, largely
followed Curcio, though it was technically decided on other grounds. The
parties stipulated to be bound by Curcio on the issue of whether the
amounts paid by McGehee in connection with the Benistar 419 Plan and
Trust were deductible. Curcio did not appear to have been decided yet at
the time McGehee was argued. The McGehee opinion (Case No. 10-102,
United States Tax Court, September 15, 2010) does contain an exhaustive
analysis and discussion of virtually all of the relevant issues.

Taxpayers and their representatives should be aware that the IRS has
disallowed deductions for contributions to these arrangements. The IRS is
cracking down on small business owners who participate in tax reduction
insurance plans and the brokers who sold them. Some of these plans
include defined benefit retirement plans, IRAs, or even 401(k) plans with life
insurance.

In order to fully grasp the severity of the situation, one must have an
understanding of IRS Notice 95-34, which was issued in response to trust
arrangements sold to companies that were designed to provide deductible
benefits such as life insurance, disability and severance pay benefits. The
promoters of these arrangements claimed that all employer contributions
were tax-deductible when paid, by relying on the 10-or-more-employer
exemption from the IRC § 419 limits. It was claimed that permissible tax
deductions were unlimited in amount.

In general, contributions to a welfare benefit fund are not fully deductible
when paid. Sections 419 and 419A impose strict limits on the amount of tax-
deductible prefunding permitted for contributions to a welfare benefit fund.
Section 419A(F)(6) provides an exemption from § 419 and § 419A for
certain “10-or-more employers” welfare benefit funds. In general, for this
exemption to apply, the fund must have more than one contributing
employer, of which no single employer can contribute more than 10 percent
of the total contributions, and the plan must not be experience-rated with
respect to individual employers.

According to the Notice, these arrangements typically involve an investment
in variable life or universal life insurance contracts on the lives of the
covered employees. The problem is that the employer contributions are
large relative to the cost of the amount of term insurance that would be
required to provide the death benefits under the arrangement, and the trust
administrator may obtain cash to pay benefits other than death benefits, by
such means as cashing in or withdrawing the cash value of the insurance
policies. The plans are also often designed so that a particular employer’s
contributions or its employees’ benefits may be determined in a way that
insulates the employer to a significant extent from the experience of other
subscribing employers. In general, the contributions and claimed tax
deductions tend to be disproportionate to the economic realities of the
arrangements.

Benistar advertised that enrollees should expect to obtain the same type of
tax benefits as listed in the transaction described in Notice 95-34. The
benefits of enrollment listed in its advertising packet included:
·        Virtually unlimited deductions for the employer;
·        Contributions could vary from year to year;
·        Benefits could be provided to one or more key executives on a
selective basis;
·        No need to provide benefits to rank-and-file employees;
·        Contributions to the plan were not limited by qualified plan rules and
would not interfere with pension, profit sharing or 401(k) plans;
·        Funds inside the plan would accumulate tax-free;
·        Beneficiaries could receive death proceeds free of both income tax
and estate tax;
·        The program could be arranged for tax-free distribution at a later date;
·        Funds in the plan were secure from the hands of creditors.

The Court said that the Benistar Plan was factually similar to the plans
described in Notice 95-34 at all relevant times.

In rendering its decision the court heavily cited Curcio, in which the court
also ruled in favor of the IRS. As noted in Curcio, the insurance policies,
overwhelmingly variable or universal life policies, required large
contributions relative to the cost of the amount of term insurance that would
be required to provide the death benefits under the arrangement. The
Benistar Plan owned the insurance contracts.

Following Curcio, as the Court has stipulated, the Court held that the
contributions to Benistar were not deductible under § 162(a) because
participants could receive the value reflected in the underlying insurance
policies purchased by Benistar—despite the payment of benefits by
Benistar seeming to be contingent upon an unanticipated event (the death
of the insured while employed). As long as plan participants were willing to
abide by Benistar’s distribution policies, there was no reason ever to forfeit
a policy to the plan. In fact, in estimating life insurance rates, the taxpayers’
expert in Curcio assumed that there would be no forfeitures, even though
he admitted that an insurance company would generally assume a
reasonable rate of policy lapses.

The McGehee Family Clinic had enrolled in the Benistar Plan in May 2001
and claimed deductions for contributions to it in 2002 and 2005. The returns
did not include a Form 8886, Reportable Transaction Disclosure Statement,
or similar disclosure.

The IRS disallowed the latter deduction and adjusted the 2004 return of
shareholder Robert Prosser and his wife to include the $50,000 payment to
the plan. The IRS also assessed tax deficiencies and the enhanced 30
percent penalty totaling almost $21,000 against the clinic and $21,000
against the Prossers. The court ruled that the Prossers failed to prove a
reasonable cause or good faith exception.

Other important facts:

·        In recent years, some § 412(i) plans have been funded with life
insurance using face amounts in excess of the maximum death benefit a
qualified plan is permitted to pay.  Ideally, the plan should limit the proceeds
that can be paid as a death benefit in the event of a participant’s death.  
Excess amounts would revert to the plan.  Effective February 13, 2004, the
purchase of excessive life insurance in any plan is considered a listed
transaction if the face amount of the insurance exceeds the amount that can
be issued by $100,000 or more and the employer has deducted the
premiums for the insurance.
·        A 412(i) plan in and of itself is not a listed transaction; however, the
IRS has a task force auditing 412(i) plans.
·        An employer has not engaged in a listed transaction simply because it
is a 412(i) plan.
·        Just because a 412(i) plan was audited and sanctioned for certain
items, does not necessarily mean the plan engaged in a listed transaction.
Some 412(i) plans have been audited and sanctioned for issues not related
to listed transactions.


Companies should carefully evaluate proposed investments in plans such
as the Benistar Plan. The claimed deductions will not be available, and
penalties will be assessed for lack of disclosure if the investment is similar to
the investments described in Notice 95-34. In addition, under IRC 6707A,
IRS fines participants a large amount of money for not properly disclosing
their participation in listed, reportable or similar transactions; an issue that
was not before the tax court in either Curcio or McGehee. The disclosure
needs to be made for every year the participant is in a plan. The forms
need to be properly filed even for years that no contributions are made. I
have received numerous calls from participants who did disclose and still
got fined because the forms were not filled in properly. A plan administrator
told me that he assisted hundreds of his participants with filing forms, and
they still all received very large IRS fines for not properly filling in the forms.

IRS has targeted all 419 welfare benefit plans, many 412(i) retirement plans,
captive insurance plans with life insurance in them and Section 79 plans.

Lance Wallach, National Society of Accountants Speaker of the Year and
member of the American Institute of CPAs faculty of teaching professionals,
is a frequent speaker on retirement plans, financial and estate planning,
and abusive tax shelters.  He speaks at more than ten conventions annually
and writes for over fifty publications. Lance has written numerous books
including Protecting Clients from Fraud, Incompetence and Scams
published by John Wiley and Sons, Bisk Education's CPA's Guide to Life
Insurance and Federal Estate and Gift Taxation, as well as AICPA best-
selling books, including Avoiding Circular 230 Malpractice Traps and
Common Abusive Small Business Hot Spots. He does expert witness
testimony and has never lost a case. Mr. Wallach may be reached at
516/938.5007, wallachinc@gmail.com, or at www.taxaudit419.com or www.
lancewallach.com.

The information provided herein is not intended as legal, accounting,
financial or any type of advice for any specific individual or other entity. You
should contact an appropriate professional for any such advice.
California Broker, June 2011

Employee Retirement Plans

By Lance Wallach

412i, 419, Captive Insurance and Section 79
Plans; Buyer Beware

The IRS has been attacking all 419 welfare benefit plans, many 412i
retirement plans, captive insurance plans with life insurance in them,
and Section 79 plans.  IRS is aggressively auditing various plans
and calling them “listed transactions,” “abusive tax shelters,” or
“reportable transactions,” participation in any of which must be
disclosed to the Service.  The result has been IRS audits,
disallowances, and huge fines for not properly reporting under IRC
6707A.  
Read More Here.
Retirement Today                                          Sept 2011

Lance Wallach

Did you get a letter from the IRS threatening to impose this fine? If you haven’t
already, you still may. Consider yourself lucky if you have not because this means
that you have more time to straighten this situation out. Do not wait for this letter to
come from the IRS before you call an expert to help you. Even if you have been
audited already, you could still get the letter and/or fine. One has nothing to do with
the other, and once the fine has been imposed, it is not able to be appealed.

Many businesses that participated in a
412i retirement plan or the IRS is auditing a
419-welfare benefit plan. Many of these plans were not in compliance with the law
and are considered abusive tax shelters. Many business owners are not even
aware that the welfare benefit plan or retirement plan that they are participating in
may be an
abusive tax shelter and that they are in serious jeopardy of huge IRS
penalties for each year that they have been in this type of plan.

Insurance companies,
CPAs, sellers of these 419 welfare benefit plans or 412i
retirement plans, as well as anyone that gave tax advice or recommended
participation in one or more of these plans, also known as a material advisor, is in
danger of being sued, fined by the IRS, or both.

There is help available if you think you may be involved with one of these 419
welfare benefit plans, 412i retirement plans, or any abusive tax shelter. IRS penalty
abatement is an option if you act now. Feel free to contact me for more information.
www.lancewallach.com

Lance Wallach, National Society of Accountants Speaker of the Year and member
of the AICPA faculty of teaching professionals, is a frequent speaker on retirement
plans, abusive tax shelters, financial, international tax, and estate planning.  He
writes about 412(i), 419, Section79,
FBAR, and captive insurance plans. He speaks
at more than ten conventions annually, writes for over fifty publications, is quoted
regularly in the press and has been featured on television and radio financial talk
shows including NBC, National Pubic Radio’s All Things Considered, and others.
Lance has written numerous books including Protecting Clients from Fraud,
Incompetence and Scams published by John Wiley and Sons, Bisk Education’s
CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the
AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and
Common Abusive Small Business Hot Spots. He does expert witness testimony
and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or
visit www.taxadvisorexpert.com.

The information provided herein is not intended as legal, accounting, financial or
any type of advice for any specific individual or other entity. You should contact an
appropriate professional for any such advice.
Abusive Insurance, Welfare Benefit, and Retirement Plans

The A2Z Directory                                                         March 2011
Lance Wallach

The IRS has various task forces auditing all section 419, section 412(i), and other
plans that tend to be abusive.  Most insurance agents sell these plans.  The IRS is
looking to raise money and is not looking to correct plans or help taxpayers. The
IRS calls accountants,
attorneys, and insurance agents “material advisors” and
also fines them the same amount, again unless the client’s participation in the
transaction is reported.  An accountant is a material advisor if he signs the return or
gives advice and gets paid.  More details can be found on http://www.irs.gov and
http://www.vebaplan.com.

Bruce Hink, who has given me written permission to use his name and
circumstances, is a perfect example of what the IRS is doing to unsuspecting
business owners.  What follows is a story about how the IRS fines him each year
for being in what they called a listed transaction.  
Listed transactions can be found
at http://www.irs.gov.  Also involved are what the IRS calls abusive plans or what it
refers to as substantially similar.  Substantially similar to is very difficult to
understand, but the IRS seems to be saying, “If it looks like some other listed
transaction, the fines apply.”  Also, I believe that the accountant who signed the tax
return and the insurance agent who sold the retirement plan will each be fined as
material advisors.  We have received many calls for help from accountants,
attorneys, business owners, and insurance agents in similar situations.  Don’t
think this will happen to you?  It is happening to a lot of accountants and business
owners, because most of theses so-called listed, abusive, or insurance agents are
selling substantially similar plans. Recently I came across the case of Hink, a
small business owner who is facing thousands in IRS penalties for 2004 and 2005
because of his participation in a section 412(i) plan.  (The penalties were
assessed under section 6707A.)

In 2002 an insurance agent representing a 100-year-old, well-established
insurance company suggested the owner start a pension plan.  The owner was
given a portfolio of information from the insurance company, which was given to the
company’s outside CPA to review and give an opinion on.  The
CPA gave the plan
the green light and the plan was started. Contributions were made in 2003.  The
plan administrator came out with amendments to the plan, based on new IRS
guidelines, in October 2004. The business owner’s insurance agent disappeared
in May 2005, before implementing the new guidelines from the administrator with
the insurance company.  The business owner was left with a refund check from the
insurance company, a deduction claim on his 2004 tax return that had not been
applied, and no agent.

It took six months of making calls to the insurance company to get a new insurance
agent assigned.  By then, the IRS had started an examination of the pension plan.  
Asking advice from the CPA and a local attorney (who had no previous experience
in these cases) made matters worse, with a “big name” law firm being
recommended and additional legal fees being billed in three months. To make a
long story short, the audit stretched on for over 2 ½ years to examine a 2-year-old
pension with four participants and the 8,000 in contributions. During the audit, no
funds went to the insurance company, which was awaiting formal IRS approval on
restructuring the plan as a traditional defined benefit plan, which the administrator
had suggested and the IRS had indicated would be acceptable. In March 2008 the
business owner received a private e-mail apology from the IRS agent who headed
the examination, saying that her hands were tied and that she used to believe she
was correcting problems and helping taxpayers and not hurting people.
Could you or one of your clients be next?

To this point, I have focused, generally, on the horrors of running afoul of the IRS by
participating in a listed transaction, which includes various types of transactions
and the various fines that can be imposed on business owners and their advisors
who participate in, sell, or advice on these transactions.  I happened to use, as an
example, someone in a section 412(i) plan, which was deemed to be a listed
transaction, pointing out the truly doleful consequences the person has suffered.  
Others who fall into this trap, even unwittingly, can suffer the same fate.

Now let’s go into more detail about section 412(i) plans.  This is important because
these defined benefit plans are popular and because few people think of retirement
plans as tax shelters or listed transactions.  People therefore may get into serious
trouble in this area unwittingly, out of ignorance of the law, and, for the same
reason, many fail to take necessary and appropriate precautions. The IRS has
warned against the section 412(i) defined benefit pension plans, named for the
former code section governing them.  It warned against trust arrangements it
deems abusive, some of which may be regarded as listed transactions.  Falling
into that category can result in taxpayers having to disclose the participation under
pain of penalties. Targets also include some retirement plans.
One reason for the harsh treatment of some 412(i) plans is their discrimination in
favor of owners and key, highly compensated employees.  Also, the IRS does not
consider the promised tax relief proportionate to the economic realities of the
transactions.  In general, IRS auditors divide audited plan into those they consider
noncompliant and other they consider abusive.  While the alternatives available to
the sponsor of noncompliant plan are problematic, it is frequently an option to keep
the plan alive in some form while simultaneously hoping to minimize the financial
fallout from penalties.

The sponsor of an abusive plan can expect to be treated more harshly than
participants.  Although in some situation something can be salvaged, the
possibility is definitely on the table of having to treat the plan as if it never existed,
which of course triggers the full extent of back taxes, penalties, and interest on all
contributions that were made – not to mention leaving behind no retirement plan
whatsoever. Another plan the IRS is auditing is the section 419 plan.  A few listed
transactions concern relatively common employee benefit plans the IRS has
deemed tax avoidance schemes or otherwise abusive.  Perhaps some of the most
likely to crop up, especially in small-business returns, are the arrangements
purporting to allow the deductibility of premiums paid for life insurance under a
welfare benefit plan or section 419 plan.  These plans have been sold by most
insurance agents and insurance companies.

Lance Wallach, National Society of Accountants Speaker of the Year and member
of the AICPA faculty of teaching professionals, is a frequent speaker on retirement
plans, abusive tax shelters, financial, international tax, and estate planning.  He
writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks
at more than ten conventions annually, writes for over fifty publications, is quoted
regularly in the press and has been featured on television and radio financial talk
shows including NBC, National Pubic Radio’s All Things Considered, and others.
Lance has written numerous books including Protecting Clients from Fraud,
Incompetence and Scams published by John Wiley and Sons, Bisk Education’s
CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the
AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and
Common Abusive Small Business Hot Spots. He does expert witness testimony
and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or
visit www.taxadvisorexpert.com.

The information provided herein is not intended as legal, accounting, financial or
any type of advice for any specific individual or other entity. You should contact an
appropriate professional for any such advice.

Small Business Retirement Plans Fuel
Litigation

Maryland Trial Lawyer
Dolan Media Newswires                 January


Small businesses facing audits and potentially huge tax penalties over certain types of
retirement plans are filing lawsuits against those who marketed, designed and sold the
plans. The
412(i) and 419(e) plans were marketed in the past several years as a way for
small business owners to set up retirement or welfare benefits plans while leveraging huge
tax savings, but the IRS put them on a list of abusive tax shelters and has more recently
focused audits on them.
The penalties for such transactions are extremely high and can pile up quickly.
There are business owners who owe taxes but have been assessed 2 million in penalties.
The existing cases involve many types of businesses, including doctors’ offices, dental
practices, grocery store owners, mortgage companies and restaurant owners. Some are
trying to negotiate with the IRS. Others are not waiting. A class action has been filed and
cases in several states are ongoing. The business owners claim that they were targeted by
insurance companies; and their agents to purchase the plans without any disclosure that the
IRS viewed the plans as
abusive tax shelters. Other defendants include financial advisors
who recommended the plans, accountants who failed to fill out required tax forms and law
firms that drafted opinion letters legitimizing the plans, which were used as marketing tools.
A 412(i) plan is a form of defined benefit pension plan. A 419(e) plan is a similar type of
health and benefits plan. Typically, these were sold to small, privately held businesses with
fewer than 20 employees and several million dollars in gross revenues. What distinguished
a legitimate plan from the plans at issue were the life insurance policies used to fund them.
The employer would make large cash contributions in the form of insurance premiums,
deducting the entire amounts. The insurance policy was designed to have a “springing cash
value,” meaning that for the first 5-7 years it would have a near-zero cash value, and then
spring up in value.
Just before it sprung, the owner would purchase the policy from the trust at the low cash
value, thus making a tax-free transaction. After the cash value shot up, the owner could take
tax-free loans against it. Meanwhile, the insurance agents collected exorbitant commissions
on the premiums – 80 to 110 percent of the first year’s premium, which could exceed million.
Technically, the IRS’s problems with the plans were that the “springing cash” structure
disqualified them from being 412(i) plans and that the premiums, which dwarfed any payout
to a beneficiary, violated incidental death benefit rules.
Under
§6707A of the Internal Revenue Code, once the IRS flags something as an abusive tax
shelter, or “listed transaction,” penalties are imposed per year for each failure to disclose it.
Another allegation is that businesses weren’t told that they had to file Form 8886, which
discloses a listed transaction.
According to Lance Wallach of Plainview, N.Y. (516-938-5007), who testifies as an expert in
cases involving the plans, the vast majority of accountants either did not file the forms for
their clients or did not fill them out correctly.
Because the IRS did not begin to focus audits on these types of plans until some years after
they became listed transactions, the penalties have already stacked up by the time of the
audits.
Another reason plaintiffs are going to court is that there are few alternatives – the penalties
are not appeasable and must be paid before filing an administrative claim for a refund.
The suits allege misrepresentation, fraud and other consumer claims. “In street language,
they lied,” said Peter Losavio, a plaintiffs’ attorney in Baton Rouge, La., who is investigating
several cases. So far they have had mixed results. Losavio said that the strength of an
individual case would depend on the disclosures made and what the sellers knew or should
have known about the risks.
In 2004, the IRS issued notices and revenue rulings indicating that the plans were listed
transactions. But plaintiffs’ lawyers allege that there were earlier signs that the plans ran
afoul of the tax laws, evidenced by the fact that the IRS is auditing plans that existed before
2004.
“Insurance companies were aware this was dancing a tightrope,” said William Noll, a tax
attorney in Malvern, Pa. “These plans were being scrutinized by the IRS at the same time
they were being promoted, but there wasn’t any disclosure of the scrutiny to unwitting
customers.”
A defense attorney, who represents benefits professionals in pending lawsuits, said the
main defense is that the plans complied with the regulations at the time and that “nobody can
predict the future.”
An employee benefits attorney who has settled several cases against insurance companies,
said that although the lost tax benefit is not recoverable, other damages include the hefty
commissions – which in one of his cases amounted to 400,000 the first year – as well as the
costs of handling the audit and filing amended tax returns.
Defying the individualized approach an attorney filed a class action in federal court against
four insurance companies claiming that they were aware that since the 1980s the IRS had
been calling the policies potentially abusive and that in 2002 the IRS gave lectures calling
the plans not just abusive but “criminal.” A judge dismissed the case against one of the
insurers that sold 412(i) plans.
The court said that the plaintiffs failed to show the statements made by the insurance
companies were fraudulent at the time they were made, because IRS statements prior to the
revenue rulings indicated that the agency may or may not take the position that the plans
were abusive. The attorney, whose suit also names law firm for its opinion letters approving
the plans, will appeal the dismissal to the 5th Circuit.
In a case that survived a similar motion to dismiss, a small business owner is suing
Hartford Insurance to recover a “seven-figure” sum in penalties and fees paid to the IRS. A
trial is expected in August.
But tax experts say the audits and penalties continue. “There’s a bit of a disconnect between
what members of Congress thought they meant by suspending collection and what is
happening in practice. Clients are still getting bills and threats of liens,” Wallach said.
“Thousands of business owners are being hit with million-dollar-plus fines. … The audits are
continuing and escalating. I just got four calls today,” he said. A bill has been introduced in
Congress to make the penalties less draconian, but nobody is expecting a magic bullet.
“From what we know, Congress is looking to make the penalties more proportionate to the
tax benefit received instead of a fixed amount.”

Lance Wallach can be reached at: WallachInc@gmail.com
For more information, please visit www.taxadvisorexperts.org Lance Wallach, National
Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching
professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial,
international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, and
captive insurance plans. He speaks at more than ten conventions annually, writes for over
fifty publications, is quoted regularly in the press and has been featured on television and
radio financial talk shows including NBC, National Pubic Radio’s All Things Considered, and
others. Lance has written numerous books including Protecting Clients from Fraud,
Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide
to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling
books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small
Business Hot Spots. He does expert witness testimony and has never lost a case. Contact
him at 516.938.5007, wallachinc@gmail.com or visit www.taxadvisorexperts.com.


The information provided herein is not intended as legal, accounting, financial or any type of
advice for any specific individual or other entity. You should contact an appropriate
professional for any such advice.
International Investigations - Criminal Investigation
(CI)

Why is IRS-CI Involved in International Investigations?

International tax compliance is a top priority of the IRS. “The IRS will
vigorously pursue tax cheats around the world, no matter how remote or
secret the location. And we will work with other governments where
possible to obtain the information we need,” asserts IRS Commissioner,
Douglas H. Shulman.
To Read More:
http://smartretirementplans.blogspot.com/2012/03/international-
investigations-criminal.html
Benistar loses another tax
court case.

Commentary



Although petitioners claim that they
"clearly disclosed their tax deduction
on the appropriate line and in
statements accompanying their
[returns]", there is no evidence that
petitioners properly disclosed their
involvement in Benistar Plan as
required under section 6664(d)(2)(A).
Because petitioners have not
introduced credible evidence with
respect to this issue, they are not
entitled to shift the burden of proof.
See sec. 7491(a). We therefore
conclude that petitioners are not
entitled to the exception under section
6664(d).
To Read More Click Below:
http://alittleeconomicsatire.blogspot.com/2012/06/normal-0-commentary
-benistar-loses.html
Nova Benefit Plans, LLC v. Commissioner of Internal Revenue

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

NOVA BENEFIT PLANS, LLC,
Petitioner,
vs.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent

CASE NO. 8:10CV335



To Read More Click Link Below:
http://getnewclients.blogspot.com/2012/12/nova-benefit-plans-llc-v-commissioner.html
Benistar 419 Plan Services, Inc. Single-handedly Shapes 419 Plan
Jurisprudence
By Cosgrove
Since its creation in December 1997, the Benistar 419 Plan, has
brought much scrutiny to the tax interpretation of 419 plans.  
Created by Daniel Carpenter, the purpose of the Benistar 419 Plan
was to provide life insurance to employees through a company’s
contributions to a multiple-employer welfare benefit plan.  The Plan
initially set itself apart by touting its fully deductible tax features.  
The IRS, however, has since determined that contributions to
Benistar 419 plans do not fit the parameters of §419A(f)(6), as they
ultimately maintain separate accounts for each employer enrolled in
the plan, and therefore are not tax deductible. As a result,
companies were forced to pay tens of thousands of dollars in back
taxes, despite tax deduction promises, and the legal world has seen
a surge in cases regarding the matter.
In one such case, Mark Curcio and Barbara Curcio, et al. v
Commissioner of Internal Revenue, No. 1768-07, 2010 WL 2134321
(U.S. Tax Ct. May 27, 2010), the court set out to determine “whether
payments to the Benistar 419 Plan & Trust for employee benefits
are ordinary and necessary business expenses under section 162
(a).”  The court concluded that said contributions did not fulfill the
definition of “ordinary and necessary” business expenses.  This
decision stemmed from the set up of the Plan.  “[P]etitioners had the
right to receive the value reflected in the underlying insurance
policies purchased by Benistar Plan.   Peitioners used Benistar Plan
to funnel pretax business profits into cash-laden life insurance
policies over which they retained control.”  The Plan has since been
continuously been referred to as an abusive tax shelter, causing
plaintiffs in many 419 related cases to question whether Benistar
knowingly made misrepresentations to clients.
In Stephen Ouwinga et al. v John Hancock Variable Life Insurance,
No. 1:09-cv-60 2010 WL 4386931 (W.D. Mich. Oct. 29, 2010), the
plaintiff claimed the Benistar 419 Plan violated RICO, the Racketeer
Influenced and Corrupt Organizations Act, which the court
subsequently shot down.   In Arrow Drilling Co., Inc., et al. v Daniel
Carpenter, et al., No. Civ.A. 2:02-CV-09097, 2003 WL 23100808 (E.
D. Pa. Sept. 23, 2003),  Plaintiffs alleged the Benistar 419 Plan
violated ERISA, the Employee Retirement Income Securities Act.  
Here the court determined that “Plaintiffs are not employer-
sponsors, but rather, employers who, acting on behalf of its
employees, brought this suit pursuant to ERISA §503.”  Since
employers cannot sue under ERISA, the court dismissed all ERISA
related claims made by Plaintiffs.
As the aforementioned cases have shown, it has been difficult to
find an effective legal avenue when fighting Daniel Carpenter and
the Benistar 419 Plan tax deficiencies.  In Wally Jones v. Daniel
Carpenter, Beinistar 419 Plan Services, Inc., and Benistar Admin
Services, Inc., Civ. No. 11-2250, 2012 WL 3430719 (D. Minn. Aug.
15, 2012) Carpenter is described as “an attorney who specializes in
tax and employee benefits.”  It affirms Carpenter wrote a book
guiding professionals through the Benistar 419 Plan and mentions a
1998 letter from Edwards & Angell, LLP.  In this letter, the law firm
opined Carpenter’s Benistar 419 Plan would host fully tax deductible
features, pointing out several differences between Benistar and
similar plans which lacked said features.
Additionally, this case mentions that “in 99 percent of the cases the
client’s closest advisor, his accountant or CPA would have been
reviewing the [Edwards & Angell] opinion letter.”  It goes on to state
Jones’ life insurance agent as well as his accountant/tax advisor
reviewed all information provided by Carpenter before advising him
to enroll in the Plan and that “neither investigated beyond the
materials furnished by Defendants.”  If Jones was “acting on advice
from [his accountant]” as the case states, perhaps his accusations
against Carpenter are misguided.  After all, even in the legal world
we openly acknowledge the choice of an attorney is an important
one and should not be based solely on advertisements; investigative
work and one’s own discretion is required.
So we’re left with the question, who is to blame in regards to the
Benistar 419 Plan? Who should be held responsible for the
thousands of dollars in back taxes many companies were forced to
pay when the IRS declared the Plan to be non-tax deductible? A
challenging case from either side.




Benistar post-65 retiree benefits administration retiree medical and
prescription drug plans solutions Brokers plan administration.



Lawsuits against Benistar


Stephen Ouwinga, et al v. Benistar 419
Plan Services,
In, et al
Filed: November 29, 2010 as 10-2531
Updated:
November 29, 2010 22:23:57
Defendants: BENISTAR 419 PLAN
SERVICES, INC.
Defendant - Appellees: EDWARDS
ANGELL PALMER &
DODGE, LLP, JOHN H. REID, III, JOHN
HANCOCK
LIFE INSURANCE COMPANY, JOHN
HANCOCK
VARIABLE LIFE INSURANCE
COMPANY, KRIS LESLEY
and others
Plaintiff - Appellants: CHRISTINE
OUWINGA, DAVID
OUWINGA, LEANN OUWINGA,
STEPHEN OUWINGA
and STONEY CREEK FISHERIES AND
EQUIPMENT
INC., on behalf of themselves and all
others similarly
situated

To See More Click Link

IRS Cracks Down on Welfare
Benefit
Plans - Benistar, Nova, Grist Mill

Recent court cases have highlighted
serious problems in plans welfare
benefit
plans issued by Nova Benefit Plans of
Simsbury, Connecticut. Recently
unsealed
IRS criminal case information now
raises concerns with other plans as
well. If you
have any type plan issued by NOVA
Benefit Plans, U.S. Benefits Group,
Benefit Plan
Advisors, Grist Mill trusts, Rex
Insurance Service or Benistar, contact
a competent
419 expert immediately. You may be
subject to an audit or in some cases,
criminal
prosecution.

To See More Click Link

Benistar Plan Abuses & 419 Plans
Litigation


To See More Click Link
Benistar
More You Should Know!

Click Here Now!

Abusive Tax Shelters



More You Should Know
The Benistar 419 Plan

To Read More Click Link
Click Here For Artiles by
Lance Wallach
Abusive Tax Shelters &
More
The IRS Raids Plan Promoter
Benistar - Large IRS Fines For
Participation in 419, 412i, Captive
Insurance and Section 79


By Lance Wallach
IRS Audits 419 Plans, IRS Raids
Benistar, Nova, Grist Mill Trust

By Lance Wallach, CLU, CHFC

Abusive Tax Shelter, Listed
Transaction, Reportable
Transaction Expert Witness

Lance Wallach at (516) 938-5007

IRS raided Nova, Benistar, Grist Mill
Trust taking records etc. IRS is now
auditing this 419 plan. As a result
lawsuits against insurance agents,
insurance cos. etc are resulting. - 419
Life Insurance Plans and Other Scams
– Large IRS Fines – The IRS Raids
Plan Promoter Benistar, and What
Does All This Mean To You? October
13
Recently IRS raided Benistar, which is
also known as the Grist Mill Trust, the
promoter and operator of one of the
better known and more heavily
scrutinized of the Section 419 life
insurance plans. IRS attacked the
Benistar 419 plan, and one of its
tactics was to demand the names of all
the clients Benistar worked with — so
they could be audited by the IRS,
Benistar refused to give the names
and actually appealed the decision to
turn over the names. The appeal was
unsuccessful, but Benistar officials still
refused to give up the names.
Recently, the IRS raided the Benistar
office and took hundreds of boxes of
information, which included information
on clients who were in their 419 plan.
In documents filed by Benistar itself,
they stated that 35 to 50 armed IRS
agents descended upon their office to
seize documents.

IRS has visited, and is still visiting most
of the other plans and obtaining
names of participants, selling
insurance agents, accountants, etc.
They have a whole task force devoted
to auditing 419, 412i and other
abusive plans.

It’s important to understand what could
happen to unsuspecting business
owners if they get involved in plans
that are not above board. Their names
could be turned over to the IRS, where
audits could ensue, and where the
outcome could be the payment of back
taxes and significant penalties. Then
they would be fined another time under
Section 6707A for not properly
reporting on themselves.

Most 419 life insurance and 412i
defined benefit pension plans were
sold to successful business owners as
plans with large tax deductions where
money would grow tax free until
needed in retirement. I would speak at
national accounting and other
conventions talking about the
problems with most of these plans. I
would be attacked by some attendees
who were making large insurance
commissions selling the plans. I would
try to warn insurance company home
office executives, but they too had
their heads in the sand because of all
the money these plans brought in.
Then the IRS got tough and started
fining the unsuspecting business
owners hundreds of thousands a year
for not reporting on themselves for
being in the plan. The agents and
insurance companies advise against
filing. “This is a good plan. We have
approval.” Not only were the business
owners fined under IRS Code 6707A,
but the insurance agents were also
fined $100,000 for not reporting on
themselves. Accountants who signed
tax returns are even being fined
100,000 by IRS. Then the business
owners sue the accountants,
insurance agents, etc. I have been
following these scenarios for a long
time. In fact, I have been an expert
witness in many of these cases, and
my side has never lost.

Most promoters of 419 plans told
clients that their plans complied with
the laws and, therefore, were not listed
tax transactions. Unfortunately, the IRS
doesn’t care what a promoter of a tax-
avoidance plan says; it makes its own
determination and punishes those who
don’t comply.

The McGehee Family Clinic, P.A. was
recently hit with back taxes and a
penalty under Code Sec. 666A in
conjunction with a deduction to the
Benistar 419 plan.

Dr. McGehee's clinic took a deduction
for a 419 plan (the Benistar plan) back
in 2005. Eventually, the McGhee
Family Clinic was audited. After the
audit, the doctor was told that the
deduction would be disallowed and
that back taxes were due. Additionally,
Dr. McGehee was hit with a 20 percent
accuracy-related penalty under Code
Sec. 6662A. Finally, the tax court
sustained the IRS's determination that
McGehee was subject to the increased
30 percent penalty, because its return
did not include a disclosure statement
indicating its participation in the
Benistar Trust. I think that in addition
to the aforementioned fines, IRS will
now fine him, both on a corporate and
personal level, another $200,000 or
more, under IRC 6707A, for not
properly disclosing his participation in
a listed transaction. There was a
moratorium on those fines until June
2010, pending new legislation to
reduce them. The fines had been
200,000 per year on the corporate
level and $100,000 per year on the
personal level. You got the fine even if
you made no contributions for the
year. All you had to do was to be in the
plan.

So Dr. McGehee's fine would be a total
of $300,000 per year for every year
that he and his corporation were in the
plan. IRS also says the fine is not
appealable. His fine would be in the
million-dollar range and it would be in
addition to the back taxes, interest,
and penalties already discussed
earlier in this paragraph.

Legislation just passed slightly
reducing those fines, but you still have
to properly file to start the Statute of
Limitations running to avoid the fines.
IRS is fining people who report on
themselves, but make a mistake on the
forms. Now that the moratorium on the
fines has passed, and so has the new
legislation, IRS has aggressively
moved to fine unsuspecting business
owners hundreds of thousands. This is
usually after they get audited, and
sometimes reach agreement with IRS.
Then another division or department of
the IRS imposes a fine under 6707A. I
am receiving a lot of phone calls from
business owners who this is happening
to.

Unfortunately, some of these people
already had called me. I warned them
to properly file under 6707A. Either
they did not believe me - it is
unbelievable - or their accountant or
tax attorney filed incorrectly. Then they
called again after being fined.

If you were involved with one of these
abusive plans, there are steps that you
can take to minimize IRS problems.
With respect to filing under Section
6707A, I know the two best people in
the country at filing after the fact,
which is what you would be doing at
this point, and still somehow avoiding
the fine. It is an art that both learned
through countless hours of research
and numerous conversations with IRS
personnel. Both have filed dozens of
times for clients, after the fact, without
the clients being fined. Either may well
still be able to help you.

And the right accountant, one with the
proper knowledge, experience, and
Service contacts, can help with the
other IRS problems as well. I recall a
case where a CPA I knew and
recommended was able to get
$300,000 or so in liabilities reduced to
three thousand dollars and change.
Do not count on a result like this, but
help is available.

It’s not worth it!

Stay away from 419 and similar plans
like Section 79 plans. Be very careful
with 412i plans. Avoid most captive
insurance plans.

It’s getting closer to the end of the
year. This is when every scammer
known to man/woman comes out of the
woodwork to sell some fly-by-night tax-
deductible plan to clients. Sometimes
they come in the form of an
accountant, insurance agent-financial
planner, or even an attorney. I see this
in all of my expert witness cases and
when I speak at conventions. I have
seen this since the 1990s. I wanted to
remind readers that, if it sounds too
good to be true, it probably is.

The information provided herein is not
intended as legal, accounting, financial
or any type of advice for any specific
individual or other entity. You should
contact an appropriate professional for
any such advice.
IRS Cracks Down on Welfare
Benefit
Plans - Benistar, Nova, Grist Mill –


Recent court cases have highlighted
serious problems in plans welfare benefit
plans issued by Nova Benefit Plans of
Simsbury, Connecticut. Recently unsealed
IRS criminal case information now raises
concerns with other plans as well. If you
have any type plan issued by NOVA
Benefit Plans, U.S. Benefits Group,
Benefit Plan
Advisors, Grist Mill trusts, Rex Insurance
Service or Benistar, contact a competent
419 expert immediately. You may be
subject to an audit or in some cases,
criminal
prosecution.

On November 17th, 59 pages of search
warrant materials were unsealed in the
Nova Benefit Plans litigation currently
pending in the U.S. District Court for the
District
of Connecticut. According to these
documents, the IRS believes that Nova is
involved
in a significant criminal conspiracy
involving the crimes of Conspiracy to
Impede the
IRS and Assisting in the Preparation of
False Income Tax Returns.

Earlier this year, 70 armed IRS Criminal
Division special agents raided the offices
of
Nova Benefit Plans in Connecticut. The
IRS has taken other recent criminal
enforcement actions in other states
including Nebraska and Milwaukee,
Wisconsin.
The IRS has told the court that it believes
Nova is promoting abusive "section 419"
welfare benefit plans.

The IRS claims that a cooperating witness
and several undercover agents
"penetrated" Nova to ascertain its
internal operations. They say Nova
helped their
clients violate tax laws by claiming the
most minor injuries as permanent
disabilities
to qualify for special tax treatment. In
other words, they would assist clients
claim a
minor scrape was a disabling and
disfiguring permanent injury.

The IRS also claims that Nova assisted
clients in backdating documents filed with
the IRS.

How does the phony welfare benefit plan
scam work? A taxpayer can contribute
money tax free to the plan on behalf of
the beneficiary. At a later date and with
the
assistance of Nova, the beneficiary can
claim the money (again tax free) because
of
a disability. According to the IRS, Nova's
plan was a scam because Nova helped
taxpayers claim false disabilities. The
Internal Revenue Code says disability
payments are tax free if there is a
permanent loss of a bodily part or
function. A small
scrape is a far cry from the loss of an eye.

In one recorded conversation a
representative of Nova said, "We've
never denied a
claim... I recently, I don't want to say the
client's name, but he went through a
minor
surgery, had a little--had a mole removed
off his elbow I think and left a little scar
the
When discussing the "independent plan
trustee" that must approve the claims, the
Nova representative said, "I, I'm gonna
put this very simply for you, we control the
trustee, okay, and I, I don't mean that in a
bad way. He's independent but he's part of
the family and we control the stuff that
happens, we have ways to make stuff
happen...It's best for us to pay out as
much claims so when it times for us to
fight
this in tax court, we can play and sing the
welfare benefit song."

Nova is not alone in the scam. According
to the IRS affidavit, Nova and its principals
have also done business as U.S. Benefits
Group, Benefit Plan Advisors, Grist Mill
trusts, Rex Insurance Service and
Benistar.

Anyone who has purchased a plan from
Nova or the related entities should
immediately seek competent counsel. If
the IRS is correct and these plans are not
legitimate, the tax consequences to
participants could be very high. In some
cases, if
clients entered these plans with
knowledge of Nova's history or promises
to evade
taxes, the consequences could involve
prison.

As a result of the raid and a cooperating
witness (we call these people informants),
the IRS is believed to have the client lists
of Nova, Grist Mill and the others.
Generally
as a matter of policy, the IRS will not
criminally prosecute a taxpayer who
comes
forward voluntarily and agrees to come
into compliance. If the IRS knocks on your
door first, however, all bets are off and
the IRS can prosecute criminally.

Author Resource:- A full service law firm
concentrating in tax matters, asset
recovery and
white-collar criminal defense. Tax
representation includes audit defense,
clean up of bad 419
plans, tax collections and criminal
investigations.

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FRAUDULENT CONVEYANCES TO
MR. CARPENTER'S ENTITIES


UNIVERSITAS EDUCATION, LLC v. NOVA
GROUP, INC.
NOS. 11CV1590-LTS-HBP, 11CV8726-LTS-HBP
UNIVERSITAS EDUCATION, LLC, Petitioner, v.
NOVA GROUP, INC., as trustee, sponsor and
fiduciary of THE CHARTER OAK TRUST
WELFARE BENEFIT PLAN, Respondent.
United States District Court, S.D. New York.
August 7, 2014.Universitas Education, LLC,
Petitioner, represented by Paula Kae Colbath,
Loeb & Loeb LLP, Bryan Isaac Reyhani, Reyhani
Nemirovsky LLP & Michael Steven Barnett, Loeb
& Loeb LLP.
Daniel E Carpenter, Movant, represented by Dan
E. LaBelle, Halloran & Sage & Anthony Joseph
Siano, Sole Practitioner.
Donald Trudeau, Movant, represented by
Dan E. LaBelle, Halloran & Sage.
Wayne Bursey, Movant, represented by Dan E.
LaBelle, Halloran & Sage, Stephen Vincent
Manning, O'brien, Tanski & Young, LLP & M.
Hatcher Norris, Butler Norris & Gold.
Halloran & Sage, LLP, Movant, represented by
Dan E. LaBelle, Halloran & Sage.
Molly Carpenter, Movant, represented by
Dan E. LaBelle, Halloran & Sage.
Amanda Rossi, Movant, represented by Dan E.
LaBelle, Halloran & Sage.
Caldwell Life Strategies Corporation, Movant,
represented by Stephen Thomas Heiser, Arkin
Kaplan Rice LLP.
Benistar Leader ?

Daniel Carpenter Goes To Jail

was arrested, and in June 2008 he was convicted.  Wednesday, close to
six years later, he was sentenced.
Tracy L. Coenen, CPA, CFF

Forensic Accountant and
Fraud Examiner

NOVA BENEFIT PLANS: IRS CRACKING
DOWN ON WELFARE BENEFIT PLANS
Standard
My original article on Nova Benefit Plans
and the IRS’s actions relating to welfare
benefit plans it believes are abusive was
posted on March 14, 2011. On April 14,
2011, I was contacted by a lawyer
representing Dan Carpenter in connection
with NOVA Benefit Plans and
Benistar.
He asked for changes to the article to clarify
that all allegations made by the IRS against
Nova and others were only allegations, and
criminal activity had not been proven in a
court of law. Those changes were made
immediately to avoid any confusion.

On June 1, 2011, I was again contacted by
the attorney representing
Daniel
Carpenter
, this time threatening to sue
me if I did not remove the article from my
site.

The article in question was not defamatory.
It simply discussed the allegations made by
the IRS and the potential problems NOVA
was facing, and quoted and linked to other
articles on Nova and Benistar.
Would you trust Benistar

Click here to Read
The IRS Raids Plan Promoter
Benistar

Read Now
Benistar Troubles Leave Twisted Trail
Simsbury tax attorney sued, indicted over bankrupt
business

Ray B. Burton III, The Connecticut Law Tribune
May 3, 2004

After more than 20 years of building and operating more than a
dozen financial planning firms, tax attorney Daniel E. Carpenter, a
Simsbury resident, tried his hand trading stock options in the
go-go tech boom of the late 1990s.

But when the millennium turned, so did his luck.

Seven clients of his Newton, Mass.-based Benistar Property
Exchange Trust Co. were left holding the bag -- to the tune of
more than $9 million.

Nearly three years later, Carpenter, whose companies list the city
of Bridgeport and the Fairfield School District among its clients, is
in heaps of trouble. Since the collapse of Benistar Property,
Carpenter has lost a multimillion dollar civil suit in Massachusetts,
was indicted by a federal grand jury in Massachusetts on 19
counts of mail and wire fraud, and faces disbarment in
Connecticut.

To his attorneys, Carpenter is a victim of the stock market
collapse who is being hounded by former clients disgruntled over
the investment losses. "At most this is a breach of contract case,"
said Carpenter's longtime outside counsel, Richard S. Order, of
Axinn, Veltrop & Harkrider's Hartford office. "Mr. Carpenter has
been devastated by all of this. I'm surprised he hasn't had a heart
attack with all the stress."

Those who trusted him with their retirement savings and other
funds, however, claim Carpenter converted their money to his
personal use, lost it all and is now trying to hide behind attorneys
and a web of shadow corporations.

MISPLACED TRUST?

Carpenter started handling so-called "1031" transactions in 1998
after meeting Martin L. Paley of Newton. Paley, who was running
his own company, joined with Carpenter and formed Benistar
Property Exchange Trust Co.

Can You Trust The Benistar
Leaders?


Civil actions commenced in the Superior Court
Department on
January 9, 16, 22, and 23, 2001; February 6,
2001; September 20,
2001; and April 30, 2002.
Following review by the Supreme Judicial Court,
451 Mass.
343 (2008), motions for sanctions and for a new
trial were heard
by Stephen E. Neel, J.
Anthony R. Zelle for Gail A. Cahaly & others.
Michael B. Keating for the intervener.
1 Jeffrey M. Johnston; Bellemore Associates,
LLC;
Massachusetts Lumber Company, Inc.; Joseph
Iantosca,
individually and as trustee of the Faxon Heights
Apartments
Realty Trust and Fern Realty Trust; and
Belridge Corporation.
2 Benistar Ltd.; Benistar Employer Services Trust
Corporation; Benistar Admin. Services, Inc.;
Carpenter Financial
Group, LLC; Molly Carpenter;
Daniel E. Carpenter
(collectively,
the Benistar defendants); Merrill Lynch, Pierce,
Fenner & Smith,
Inc.; and U.S. Property Exchange; Bingham
McCutchen LLP,
intervener in the sanctions proceedings.
JOURNAL OF ACCOUNTANCY
COLUMNTAX MATTERS
Tax Court Again Takes Dim View
of Benistar Plan
BY LAURA JEAN KREISSL, PH.D.
AND DARLENE PULLIAM, CPA, PH.
D.
January 1, 2011

In McGehee Family Clinic the Tax Court
ruled that a clinic and shareholder’s
investment in an employee benefit plan
marketed under the name “Benistar” was a
listed transaction substantially similar to
the transaction described in Notice 95-34
(1995-1 C.B. 309). This is at least the second
case in which the court has ruled against
the Benistar welfare benefit plan.

Notice 95-34 was issued in response to
trust arrangements sold to companies that
were designed to provide deductible
benefits such as life insurance, disability
and severance pay benefits. The promoters
of these arrangements claimed that all
employer contributions were tax-
deductible when paid, by relying on the 10-
or-more-employer exemption from the IRC
§ 419 limits.

READ MORE NOW
More Bad News For Holders Of
Welfare Benefit Plans - Nova Faces
Another Legal Setback

The search (more like an armed
assault), which involved between
35 and 50 IRS Criminal
Investigation Division agents
wearing black Kevlar bullet-proof
vests and fully armed with
automatic weapons, who herded
the employees of the various
companies then at the office
located at 100 Grist Mill Road into
a conference room and illegally
searched and interrogated them,
was completely over-the-top,
unnecessary, and more akin to
something that would happen in
the movies or the TV show "24"
rather than in the small town of
Simsbury...", said lawyers for the
welfare benefit plan promoters.
And so began the battle by
Benistar and others to get back
documents seized by the IRS last
year. In a stipulation filed in
federal court last week, the feds
get to copy and keep the
documents. Bad news for the
NOVA folks and bad news for the
thousands holding the disputed
welfare benefit plans.

To Read More