Founder of Russian Bank Arrested in London on U.S. Tax Charges

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Former Tax Preparer Sentenced to 15 Months in Prison For Various Tax Crimes
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Founder of Russian Bank Arrested in London on U.S. Tax Charges

According to a Department of Justice press release, a high-profile founder of a Russian bank was arrested in London recently related to criminal tax charges in the United States. As you will see, the fact pattern of this story may appear to be particular this particular defendant, but the message that the IRS and Department of Justice is sending is clear: if you are a U.S. resident and subsequently try to illegally avoid tax, up to and including renouncing your U.S. citizenship, the government will be there to challenge you. If you are a U.S. resident or foreign national and are unsure of the tax treatment of a particular transaction, you should consider consulting with an experienced tax attorney.

The indictment alleges that Oleg Tinkov, the founder and former majority shareholder of a virtual bank, filed a false U.S. tax return in 2013. Prior to the initial public offering of Tinkov’s bank, he was a U.S. citizen and was required to pay taxes in the U.S. on his worldwide income. Immediately after his bank was listed on the London Stock Exchange, the value of his ownership (both directly and indirectly) in his bank shares was valued at over $1 billion.

Defendant Renounced His Citizenship But Allegedly Failed to Account for All of His Income

Three days after the Initial Public Offering, Tinkov renounced his U.S. citizenship as part of a structuring plan involving the British Virgin Islands. Under U.S. tax law, renouncing your citizenship generally creates a realization event whereby the former U.S. citizen is taxed as if they had sold their assets for fair market value via an “exit tax”. Thus, the IRS and Department of Justice argue that Tinkov should have included the income derived from the fictional sale of his bank shares, which would have included an extremely large gain, considering the post-IPO valuation.

Authorities allege that Tinkov did file a 2013 individual income tax return in the U.S. and reported income of just over $200,000. The filing also included an Initial and Annual Expatriation Statement that indicated that his net worth was only $300,000. Obviously, the IRS and Department of Justice are of the opinion that Tinkov should have taken into account the full value of his bank shares. If convicted, Tinkov faces up to three years in prison for each count of filing a false tax return. Additionally, Tinkov faces a period of supervised release upon the end of any physical incarceration and restitution.

Considerations for Taxpayers with Potential International Tax Exposures

Taxpayers who have either expatriated or have connections with countries outside of the U.S. have an entire set of international U.S. tax rules to be concerned about that many domestic taxpayers are mostly unconcerned with. From the tax implications of foreign trusts, gifts, and income streams, to the taxation of the earnings of expatriated citizens, the U.S. tax system is riddled with traps for the unwary.

If you have expatriated from the United States or are considering the transition, it is critical that you consult with an experienced tax planning attorney to discuss the implications and ongoing filing and tax payment requirements once you expatriate. Likewise, if you are a U.S. resident who has an interest or receives payments from outside of the United States, you should discuss the implications of such interest or payments with an experienced tax attorney. Many foreign payments and interests in accounts can trigger special taxation regimes, treaty implications, and information reporting requirements. A tax attorney who has extensive experience in the foreign activity of U.S. taxpayers can help you navigate the labyrinth of tax planning and compliance of international transactions.

Contact an Experienced Tax Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing a diverse group of taxpayers. From individuals to middle market businesses and beyond, our team of zealous advocates will assist in the development of a strategy to help you reach your specific goals and objectives. Whether you are under a tax examination or are in need of tax planning advice, contact the Tax Law Offices of David W. Klasing today, online or by phone at (800) 681-1295, for a reduced-rate consultation.

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Note:  As long as a taxpayer that has willfully committed tax crimes self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax prosecution, the taxpayer can be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously receive a break on the civil penalties that would otherwise apply.  It is imperative that you hire an experienced and reputable tax defense attorney to take you through the voluntary disclosure process.  As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one-stop-shop to efficiently achieve the optimal and predictable results.   See our Testimonials to see what our clients have to say about us!

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