The Restricted Property Trust is technically classified as a Welfare Benefit Plan. Welfare Benefit Plans are definitely nothing new. They actually date back to 1928, and come in many different names and forms.
There are currently 34 US States that use some form of a Welfare Benefit Plan for their State employees. What most people don’t know is that, ALL Welfare Benefit Plans must be related and/or associated to an actual welfare situation, such as death, disability, or disease.
Now the bad news is that, The Restrictive Property Trust is just a new-model 419-SCAM. The problem is that it’s a SCAM and nothing more.
In conjunction with Section 83, The Restrictive Property Trust makes the insurance tax-deductible going-in and tax-free coming-out, of course with some minor modifications.
Of course there is no such thing as a The Restrictive Property Trust in the Internal Revenue Code. The plan promoter claims a patent, etc., but in reality, tax-strategy patents were completely out-lawed sometime in 2011. Is his patent from the 90’s?
The downside of The Restrictive Property Trust is that the IRS requires a substantial risk of forfeiture because of no reason other than the fact that it is just another scam.
If you want to lose your money, put it in The Restrictive Property Trust. Shortly after the participants get audited they usually sue the salesman and insurance company. The promoters claim that they have a legal opinion. The IRS does not care and disallows the deduction.
The American Jobs Creation Act of 2004 (2004 Jobs Act) imposed new penalties on taxpayers who fail to adequately disclose “reportable transactions” to the IRS. Before the 2004 Jobs Act, taxpayers were generally only penalized for not disclosing a reportable transaction if the IRS was successful in challenging the transaction. Accordingly, many taxpayers were not overly concerned about disclosing these transactions, especially if the tax benefits of the transaction were clearly legitimate and/or there was little chance of a successful IRS challenge.
In an attempt to curb the use of abusive tax shelters, the 2004 Jobs Act enacted new, stiff penalties for failure to adequately disclose a reportable transaction to the IRS on a return due after October 22, 2004 (the date the 2004 Jobs Act was signed into law). Under the 2004 Jobs Act, natural persons who failed to disclose a reportable transaction to the IRS were subject to a $10,000 penalty. Other nonreporting taxpayers were subject to a $50,000 penalty. The penalties increased to $100,000 and $200,000, respectively, for natural persons and other taxpayers who failed to disclose a reportable transaction that is a listed transaction.
In an effort to achieve proportionality between the penalty and the tax savings resulting from the reportable transaction, the 2010 Small Business Act revised the penalty structure for all reportable transaction penalties assessed after December 31, 2006. Under the Small Business Act, a participant in a reportable transaction who fails to disclose is subject to a penalty equal to 75 percent of the reduction in tax reported on the participant’s tax return as a result of participation in the transaction. Regardless of the amount determined under the general rule, the penalty for each such failure may not exceed $10,000 in the case of a natural person and $50,000 for all other taxpayers. For listed transactions, the maximum penalties are increased to $100,000 and $200,000, respectively, for natural persons and other taxpayers. The Small Business Act also establishes a minimum penalty with respect to failure to disclose a reportable or listed transaction. The minimum penalty is $5,000 for natural persons and $10,000 for all other taxpayers.
If a reportable transaction is not disclosed and results in an understatement of tax, an additional penalty in the amount of 30 percent of the understatement may be assessed.
If the reportable transaction is disclosed, taxpayers are still subject to a 20 percent penalty on the understatement of tax. In addition to the penalties, the statute of limitations is suspended for any listed transaction that is not disclosed.
Unlike most other penalties, the law significantly limits the IRS’s ability to rescind or abate these penalties for reasonable cause or other reasons. Accordingly, taxpayers should be extra vigilant in identifying and disclosing these transactions. Taxpayers should not fall into the trap of thinking reportable transactions are limited to abusive tax shelters. The definition of a reportable transaction is very broad and includes many transactions that are routine and perfectly legitimate.
The IRS has additional information available on its website (including Treasury Regulations discussed herein).
Reportable Transactions Defined Transactions of Interest Listed Transactions Tax-Exempt Entities Material Advisors It is very important that reportable transactions be adequately disclosed and material advisors timely register transactions as required and maintain sufficient documentation. A breach of these rules can result in significant penalties.
The Restricted Property Trust is technically classified as a Welfare Benefit Plan. Welfare Benefit Plans are definitely nothing new. They actually date back to 1928, and come in many different names and forms.
ReplyDeleteThere are currently 34 US States that use some form of a Welfare Benefit Plan for their State employees. What most people don’t know is that, ALL Welfare Benefit Plans must be related and/or associated to an actual welfare situation, such as death, disability, or disease.
Now the bad news is that, The Restrictive Property Trust is just a new-model 419-SCAM. The problem is that it’s a SCAM and nothing more.
In conjunction with Section 83, The Restrictive Property Trust makes the insurance tax-deductible going-in and tax-free coming-out, of course with some minor modifications.
Of course there is no such thing as a The Restrictive Property Trust in the Internal Revenue Code. The plan promoter claims a patent, etc., but in reality, tax-strategy patents were completely out-lawed sometime in 2011. Is his patent from the 90’s?
The downside of The Restrictive Property Trust is that the IRS requires a substantial risk of forfeiture because of no reason other than the fact that it is just another scam.
If you want to lose your money, put it in The Restrictive Property Trust. Shortly after the participants get audited they usually sue the salesman and insurance company. The promoters claim that they have a legal opinion. The IRS does not care and disallows the deduction.
Reportable Transactions
ReplyDeleteThe American Jobs Creation Act of 2004 (2004 Jobs Act) imposed new penalties on taxpayers who fail to adequately disclose “reportable transactions” to the IRS. Before the 2004 Jobs Act, taxpayers were generally only penalized for not disclosing a reportable transaction if the IRS was successful in challenging the transaction. Accordingly, many taxpayers were not overly concerned about disclosing these transactions, especially if the tax benefits of the transaction were clearly legitimate and/or there was little chance of a successful IRS challenge.
In an attempt to curb the use of abusive tax shelters, the 2004 Jobs Act enacted new, stiff penalties for failure to adequately disclose a reportable transaction to the IRS on a return due after October 22, 2004 (the date the 2004 Jobs Act was signed into law). Under the 2004 Jobs Act, natural persons who failed to disclose a reportable transaction to the IRS were subject to a $10,000 penalty. Other nonreporting taxpayers were subject to a $50,000 penalty. The penalties increased to $100,000 and $200,000, respectively, for natural persons and other taxpayers who failed to disclose a reportable transaction that is a listed transaction.
In an effort to achieve proportionality between the penalty and the tax savings resulting from the reportable transaction, the 2010 Small Business Act revised the penalty structure for all reportable transaction penalties assessed after December 31, 2006. Under the Small Business Act, a participant in a reportable transaction who fails to disclose is subject to a penalty equal to 75 percent of the reduction in tax reported on the participant’s tax return as a result of participation in the transaction. Regardless of the amount determined under the general rule, the penalty for each such failure may not exceed $10,000 in the case of a natural person and $50,000 for all other taxpayers. For listed transactions, the maximum penalties are increased to $100,000 and $200,000, respectively, for natural persons and other taxpayers. The Small Business Act also establishes a minimum penalty with respect to failure to disclose a reportable or listed transaction. The minimum penalty is $5,000 for natural persons and $10,000 for all other taxpayers.
If a reportable transaction is not disclosed and results in an understatement of tax, an additional penalty in the amount of 30 percent of the understatement may be assessed.
If the reportable transaction is disclosed, taxpayers are still subject to a 20 percent penalty on the understatement of tax. In addition to the penalties, the statute of limitations is suspended for any listed transaction that is not disclosed.
Unlike most other penalties, the law significantly limits the IRS’s ability to rescind or abate these penalties for reasonable cause or other reasons. Accordingly, taxpayers should be extra vigilant in identifying and disclosing these transactions. Taxpayers should not fall into the trap of thinking reportable transactions are limited to abusive tax shelters. The definition of a reportable transaction is very broad and includes many transactions that are routine and perfectly legitimate.
The IRS has additional information available on its website (including Treasury Regulations discussed herein).
Reportable Transactions Defined
Transactions of Interest
Listed Transactions
Tax-Exempt Entities
Material Advisors
It is very important that reportable transactions be adequately disclosed and material advisors timely register transactions as required and maintain sufficient documentation. A breach of these rules can result in significant penalties.