Call Now (800) 681-1295

“I’m guilty” says California Taxpayer with Hidden Israeli Bank Accounts

Table of Contents

    Mr. Aaron Cohen, a California resident, maintained two foreign bank accounts. The headquarters for both banks were in Tel Aviv, Israel. That part was fine. What was not fine, however, was Mr. Cohen’s failure to disclose the accounts with the Internal Revenue Service when they earned interest income.

    One of Mr. Cohen’s undeclared accounts was located in the Cayman Islands. To preserve their secrecy from the U.S. government, the accounts were maintained under a name other than Mr. Cohen’s—a “nominee” account, as they are called. According to Black’s Law Dictionary, a nominee is one “who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit of others.” See also U.S. v. Memmott (E.D. Cal., Aug. 21, 2013, CR-S-08-402 KJM), 2013 WL 4496615 (identifying the six required elements).

    Mr. Cohen used a creative device that worked for him for several years. Shortly after the funds were transferred to the Cayman Islands, he used them as collateral for loans from another branch of the bank, located in Los Angeles. And he did not identify his ownership of the Cayman Islands accounts on any of the loan documents.

    Effectively, Mr. Cohen was borrowing against his own money. From a tax perspective, though, he paid tax-deductible interest on the loans, and he was failing to report on his U.S. income tax return the interest income he earned on the assets in the Cayman Island accounts.

    Mr. Cohen employed his strategy of borrowing against his own money starting in 2000, and repeated it in 2009. From 2006 through 2009, the DOJ reports that Cohen had approximately $238,000 of unreported interest income.

    What did this earn Cohen? A guilty plea for concealing income and at least three other things: (1) potentially five years in prison, (2) a fine of $250,000 owed to the IRS, and (3) a civil penalty, in the amount of 50% of the highest balance of his undeclared foreign account, for failing to file his Report of Foreign Bank and Financial Reports or “FBAR.”


    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934