There’s nothing illegal about having a foreign (offshore) trust. However, if you use that trust to shelter (hide) income, and if you fail to disclose the trust, and if you lie to federal agents about the trust, you can find yourself in a world of problems.
Take the case of Dr. David Alan of Rices Landing, Pennsylvania (near Pittsburgh). Dr. Alan reported taxable (joint) income of $20,254 in 2001 and just $38 in 2002. The US Attorney’s Office alleges that the true income was $148,785 in 2001 and $242,740 in 2002. Dr. Alan allegedly decided to avoid the hassle of a false tax return in 2003 and 2004 by simply not filing a return for those years.
So what did Dr. Alan do? He allegedly formed an offshore trust on Nevis, and island in the West Indies. He funneled income into the trust and a shell corporation and used a mail drop in Canada, too. He then supposedly used false invoices to ‘decrease’ his income (by allegedly inflating his cost of goods sold). He then allegedly took the leftover money and used it for personal expenses. Finally, he allegedly lied to federal agents about all of this. That’s not a trifecta but a quinfecta of troubles for the doctor.
Given that Dr. Alan is accused of under-reporting, in total, almost $900,000 of income, he’s facing a lengthy stay at ClubFed if convicted of the charges.
News Stories: Pittsburgh Tribune-Review, Observer-Reporter
