Zhanna Ziering Comments on U.S. Enforcement of FBAR Violations with Tax Notes
Caplin & Drysdale

Zhanna Ziering Comments on U.S. Enforcement of FBAR Violations with Tax Notes

Date: 5/26/2017

The United States filed an amended complaint seeking recovery of foreign bank account reporting penalties on a trust administrator and the family of an alleged willful FBAR violator — a deceased seller of jewelry purported to affect the wearer’s chi.

While until recently it has been unusual for the IRS to apply the concept of transferee liability to an FBAR case, Zhanna A. Ziering of Caplin & Drysdale, Chtd. noted that the government’s assertion of liability was reminiscent of estate tax cases and the assertion of transferee liability in so-called midco cases.

“Somebody at the [Justice Department] must have said, ‘Well, why don’t we do this here?’” Ziering said. “It was a novel idea in this context, and I think we are going to see more of it because the government is reaching further to protect their interests,” she added.

Ziering also noted that after the initial complaint was filed in Park, an amended complaint was filed only a few weeks later in U.S. v. Estate of Schoenfeld, 16-cv-1248 (MD Florida), in which the government named the decedent’s closest relative as a defendant in an FBAR case after the decedent’s estate transferred retirement funds to the relative. The Schoenfeld complaint did not offer as much detail about the transferee liability as Park, which alleged fraudulent transfer, though in both cases the government “was following the money,” Ziering said.

. . .

Ziering, looking to paragraph 68 in the second amended complaint, foresaw the “main fight” coming down to when the United States became a creditor.

“Was it on the date of the violation or at the time the penalty was assessed?” Ziering said. She added that even if the United States was found to be a creditor in 2014, that may not end the dispute by itself “as some transfers may still be subject to a clawback.”

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Excerpt taken from the article "Government’s Amended FBAR Complaint Seeks to Center Its Chi" by Andrew Velarde for Tax Notes.

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