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Tax Avoidance and Evasion – Where is the line drawn?

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Charle Butler
Charle Butler
2021-03-12
Verified
I was hesitant to hire the Spodek Law Group. I read reviews and knew they have a great reputation. However, I thought I would spend money and not see or speak to my attorney. From the beginning to end of my case Todd and the entire staff were available and willing to help. We worked towards and end result that was way above my expectation and Todd delivered. I am forever grateful for patience and long days and night spent working on my case. Thanks Todd and the entire team!
Mesonista parsons
Mesonista parsons
2021-03-05
Verified
My attorney at Spodek was Abigail. She was very knowledgeable and helpful with all my questions and concerns, as well as responsive. Her fees are affordable and Abigail took the time to make sure I understood everything relating to my case. I highly recommend Abigail and will request her services in the future.
debabrata chakraborty
debabrata chakraborty
2021-03-03
Verified
Todd A Spodek is the experienced and best criminal lawyer at USA. He is very professional and always respond on time. Alex also very cooperative and always help me. They took care me and my problem like family member. I am 100% satisfied for their professional service. My result was unexpected and amazing. They dismissed my case. I am really grateful to them. I will recommend you to go there if you want to solve your problem. I wish all the best for them.
Asata Hendricks
Asata Hendricks
2021-03-02
Verified
Truly appreciate the work the guys did!. Exceptional team & I know they care about each and everyone of their clients. I am super thankful to be referred to Spodek Law Group and I am grateful Todd & Alex were able to work diligently to achieve an outcome I am pleased with. Despite COVID they stayed on top of things and kept me informed every step of the way. Very thankful.
Mike Moroff
Mike Moroff
2021-02-26
Verified
I'm very satisfied with the services rendered by Todd, Alex and Mary Lou. I whole heartedly recommend Spodek Law Group . I've worked with and have retained other attorneys in the past with Todd's firm being the cream of the crop for many reasons. A very serious legal matter was resolved after a year's hard work and effort. Todd expertly guided me through the process and was able to navigate and make the good journey bearable as well as successful. Mary Lou initially provided excellent assistance before referring my case to Todd. Alex's support was effective and timely. The customer portal (MyCase) is an invaluable communication tool that also kept track of my case. Various aspects of my case were explained and there were several options provided but I made the final decision of how the case would be handled. The legal fee was reasonable considering the effort and amount of work plus it was a flat fee regardless of the length of time required to conclude my case. Todd made himself available to me and we had many scheduled meetings to go over the progress and to discuss the next steps. I felt more confident after many discussions with him. You will not go wrong choosing Spodek Law Group for legal matters.
Josh Katz
Josh Katz
2021-02-24
Verified
Being that it was the first time that I was in need of an attorney, I was afraid and hesitant and knew I needed the absolute best. It is beyond understood why Spodek Law Group has a reputation of being the top, if not the best law firm in New York. Alex and Abigail were there every step of the way even at the most unconvenient hours. I could not have asked for more. They are extremely good at what they do and they delivered much much more than just winning my case. A big thank you to Alex and Abigail for all the guidance and counseling and their upmost loyal support that extended far more than just legally. If you need the absolute best than don't hesitate to hire Spodek Law Firm.
L.C.
L.C.
2021-02-24
Verified
I cannot tell you how thankful I am to Todd and Alex for their hard work and dedication to my case. I had never been in any trouble before but I had an unfortunate event occur and in the midst of COVID-19 at that therefore I knew I needed a team that was dedicated to my success. Today- my case has been finalized and I’m walking away with no record and can continue life as a mother and a Grad student worry free. I cannot express enough gratitude for their assistance.
AnnMarie Soliman
AnnMarie Soliman
2021-02-23
Verified
I received a summons and called Spodek law group for a free consultation. Alex took my call and was very quick and responsive. He was available anytime through multiple platforms and very reassuring when needed. They are extremely organized and thorough. They got my case dismissed! I’m very grateful. Thank you Alex and Todd!


Tax Avoidance and Evasion – Where is the line drawn?

Tax Avoidance and Evasion – Where is the line drawn?

Federal tax law makes an attempt to delineate a very clear distinction between tax avoidance, which at worst only exposes the Tax Practitioner and his or her client to possible civil penalties, and tax evasion, for which criminal penalties could apply to all parties involved. In Gregory v. Helvering, 293 U.S. 465 (1935), the Supreme Court defined permissible tax avoidance as actions that “reduce, avoid, minimize, or alleviate taxes through wholly legitimate means”.  In contrast, evasion is about tax avoidance that is ordinarily accomplished by way of an element of deceit or concealment and at times patently illegal avenues. Taxpayers are legally entitled to select the most tax efficient alternative to structure any transaction.  In the Helvering case, it was stated that “[t]he legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted”…

Although it is generally agreed that taxpayers are entitled to avoid taxes, this historical controversy stems from the fact that in order for the structuring of a tax avoidance transaction (or transactions) to hold up to governmental scrutiny and thus fend off being recharacterized or just disregarded, the transaction structure hast to be compliant with the totality of tax law as currently enacted which includes statutory and common-law requirements such as the Economic Substance, Sham Transaction, Step Transaction, and Substance Over Form Doctrines, and the Business Purpose Test.

The Statutory and Judicial Restraints on Tax Avoidance:

There are judicial and statutory constraints on tax reduction strategies of general application.  These include the Economic Substance, Sham Transaction, Step Transaction, and Substance over Form Doctrines, and the Business Purpose Test.  These can all be traced back to the Supreme Court’s holding in the landmark Gregory v. Helvering case. This case was about a taxpayer who formed a corporation cheifly for the purpose of exploiting the tax free reorganization provisions so as to avoid gain recognition on a planned subsequent sale of stock to be transferred to the newly formed Corporation. In Gregory v. Helvering, the Court in found that the taxpayer was in compliance with each and every element required by statute and so a statutory reorganization was achieved. The judge held that the motive of the taxpayer to avoid tax in and of itself was not enough to render impermissible what the reorganization statute clearly allowed.  It went on to focus on whether what was done, apart from the tax motive, was the act that the statute intended. Ultimately, the court answered that question in the negative, holding that reorganization was not accomplished, but it was simply “a transfer of assets by one corporation to another in pursuance of a plan having no relation to the business of either”.

Use of Tax Shelters

Tax Court consistently frowns upon losses, deductions and credits from transactions that it deems to be tax shelters via attack as a sham transaction, or by not respecting the form the transactions takes and determines the associated income tax consequences accordingly.  For a transaction to be respected, it must be motivated by business considerations instead of by attractive tax avoidance benefits gained via the use of meaningless labels.

  • The definition that the tax court a generic tax shelter as a tax shelter that lacks statutory authority and has the following characteristics:
  • The main intention of the associated promotional materials surrounded tax benefits.
  • The taxpayers using the shelter accepted the terms of purchase in the absence of price negotiation.
  • The assets that were purchased consist of prepackaged property rights which are difficult to value in the thin air environment in which they were sold and, invariably, are substantially overvalued in relation to the property rights actually purchased.
  • The property rights have been acquired or created at a comparatively low cost shortly before the transactions under scrutiny.
  • The consideration was deferred via promissory notes which are often nonrecourse in form or in substance.
  • Transactions that are identified as generic tax shelters in the past have included investments in the cable television industry, master music recordings, inventions, mining activities, films rights, art packages, videotape recordings, and luxury yacht leasing arrangements.

The Civil Penalties Related to Tax Shelters

There are penalties surrounding reportable transaction understatements, which increase when the underreporting is coupled with non-disclosure and in which fraud is deemed to have occurred. Civil penalties may be levied against taxpayers who participate in reportable transactions or abusive tax shelters, and thus understate their tax liability.

The fine for failure to disclose a reportable transaction is $10,000. Should the shelter be a listed transaction, the penalty goes up as high as $200,000 ($100,000 for individuals).

Possible Criminal Liability for Tax Practitioners

It is important to emphasize the obvious detail that tax evasion is a rather different situation than tax avoidance is. Tax avoidance involves the meditated legal structuring of one’s financial affairs so his or her tax liability is legally reduced or minimized. Tax avoidance is not against the law. As one famous judge said it, “one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934). Tax evasion, in contrast, is against the law.  It involves the willful attempt to avoid paying tax liabilities after it has been incurred.

A tax practitioner may be found guilty to the same extent as the taxpayer themselves. This is because in Section 7201, the scope of tax evasion is rather broad. Specifically, Section 7201 provides that tax evasion includes a individual’s attempt “in any manner”—including helping someone else—“to evade or defeat any tax” or its payment.  Therefore, the statute allows the IRS to prosecute any taxpayer for the evasion of another person’s tax liability. The defendant does not have to be the taxpayer in question themselves.

 

 


Charle Butler
Charle Butler
2021-03-12
Verified
I was hesitant to hire the Spodek Law Group. I read reviews and knew they have a great reputation. However, I thought I would spend money and not see or speak to my attorney. From the beginning to end of my case Todd and the entire staff were available and willing to help. We worked towards and end result that was way above my expectation and Todd delivered. I am forever grateful for patience and long days and night spent working on my case. Thanks Todd and the entire team!
Mesonista parsons
Mesonista parsons
2021-03-05
Verified
My attorney at Spodek was Abigail. She was very knowledgeable and helpful with all my questions and concerns, as well as responsive. Her fees are affordable and Abigail took the time to make sure I understood everything relating to my case. I highly recommend Abigail and will request her services in the future.
debabrata chakraborty
debabrata chakraborty
2021-03-03
Verified
Todd A Spodek is the experienced and best criminal lawyer at USA. He is very professional and always respond on time. Alex also very cooperative and always help me. They took care me and my problem like family member. I am 100% satisfied for their professional service. My result was unexpected and amazing. They dismissed my case. I am really grateful to them. I will recommend you to go there if you want to solve your problem. I wish all the best for them.
Asata Hendricks
Asata Hendricks
2021-03-02
Verified
Truly appreciate the work the guys did!. Exceptional team & I know they care about each and everyone of their clients. I am super thankful to be referred to Spodek Law Group and I am grateful Todd & Alex were able to work diligently to achieve an outcome I am pleased with. Despite COVID they stayed on top of things and kept me informed every step of the way. Very thankful.
Mike Moroff
Mike Moroff
2021-02-26
Verified
I'm very satisfied with the services rendered by Todd, Alex and Mary Lou. I whole heartedly recommend Spodek Law Group . I've worked with and have retained other attorneys in the past with Todd's firm being the cream of the crop for many reasons. A very serious legal matter was resolved after a year's hard work and effort. Todd expertly guided me through the process and was able to navigate and make the good journey bearable as well as successful. Mary Lou initially provided excellent assistance before referring my case to Todd. Alex's support was effective and timely. The customer portal (MyCase) is an invaluable communication tool that also kept track of my case. Various aspects of my case were explained and there were several options provided but I made the final decision of how the case would be handled. The legal fee was reasonable considering the effort and amount of work plus it was a flat fee regardless of the length of time required to conclude my case. Todd made himself available to me and we had many scheduled meetings to go over the progress and to discuss the next steps. I felt more confident after many discussions with him. You will not go wrong choosing Spodek Law Group for legal matters.
Josh Katz
Josh Katz
2021-02-24
Verified
Being that it was the first time that I was in need of an attorney, I was afraid and hesitant and knew I needed the absolute best. It is beyond understood why Spodek Law Group has a reputation of being the top, if not the best law firm in New York. Alex and Abigail were there every step of the way even at the most unconvenient hours. I could not have asked for more. They are extremely good at what they do and they delivered much much more than just winning my case. A big thank you to Alex and Abigail for all the guidance and counseling and their upmost loyal support that extended far more than just legally. If you need the absolute best than don't hesitate to hire Spodek Law Firm.
L.C.
L.C.
2021-02-24
Verified
I cannot tell you how thankful I am to Todd and Alex for their hard work and dedication to my case. I had never been in any trouble before but I had an unfortunate event occur and in the midst of COVID-19 at that therefore I knew I needed a team that was dedicated to my success. Today- my case has been finalized and I’m walking away with no record and can continue life as a mother and a Grad student worry free. I cannot express enough gratitude for their assistance.
AnnMarie Soliman
AnnMarie Soliman
2021-02-23
Verified
I received a summons and called Spodek law group for a free consultation. Alex took my call and was very quick and responsive. He was available anytime through multiple platforms and very reassuring when needed. They are extremely organized and thorough. They got my case dismissed! I’m very grateful. Thank you Alex and Todd!

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Testimonials

Spodek Law Group have offered me excellent support and advice thru a very difficult time. I feel I've dealt with someone who truly cares and wants the best outcome for you and yours. I'm extremely grateful for all the help Spodek Law Group has offered me. I can't recommend them enough.

~ David Bruce

Spodek Law Group was incredibly professional and has given me the best advice I could wish for. They had been helpful and empathetic to my stressful situation. Would highly recommend Spodek Law Group to anyone I meet.

~ Rowlin Garcia

Best service I ever had. Todd is absolutely class personified. You are in the safest hands with spodek. They have their clients interest in mind.

~ Francis Anim

Spodek Law Group

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Hear From Our Clients

"Spodek Law Group have offered me excellent support and advice thru a very difficult time. I feel I've dealt with someone who truly cares and wants the best outcome for you and yours. I'm extremely grateful for all the help Spodek Law Group has offered me. I can't recommend them..."

David Bruce

"Spodek Law Group was incredibly professional and has given me the best advice I could wish for. They had been helpful and empathetic to my stressful situation. Would highly recommend Spodek Law Group to anyone I meet."

Rowlin Garcia

"Best service I ever had. Todd is absolutely class personified. You are in the safest hands with spodek. They have their clients interest in mind."

Francis Anim
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