I’m a big fan of Rex Stout, the creator of fictional detective Nero Wolfe. Murder by the Book is prototypical Stout, and is one of my favorites. As a published author, I’ve gotten to see some of the workings of the publishing industry. The plot in Murder by the Book centers on an unpublished novel titled Put Not Your Trust. And that’s where this tax story begins.
Most Americans believe they pay too much in taxes. High income taxpayers think this too. Many find themselves investing in various schemes in an effort to lower their taxes. Sometimes they pay more in fees than they will save in taxes. One of the most popular vehicles—but definitely one that needs to be carefully explored—are offshore trusts.
The idea is to take taxable income and turn it into nontaxable income. Usually these trusts are found in tax havens such as the Cayman Islands or the Isle of Man. Promoters promise the moon, but remember my old adage: if it sounds too good to be true, it probably is.
Americans are taxed on their worldwide income. If you have an offshore trust, it may not file documents with the IRS. But if you look at Schedule B, you will note that there’s a question that asks if you are the grantor of an offshore trust. If you are, you need to report it (in most cases).
Ah, you’ll just ignore that bit of tax law; the IRS will never catch you. Warning: you’ve just committed a felony. Of course, the IRS might not catch you, but you won’t be happy if they do.
The IRS goes after promoters of these sham trusts. Victor Carlysle Sullivan, Jr. of Albany, GA is the latest to find this out. Sullivan charged between $5,950 and $49,500 to invest in these trusts. He’s just been barred from promoting or organizing any more of them. And he has to send the names and social security numbers of his clients to the IRS. If you’re one of his “lucky” customers, expect a friendly neighborhood IRS agent to be knocking on your door in the near future.
So put not your trust in offshore trusts, because if it sounds too good to be true, it probably is. And Mr. Sullivan’s customers will almost certainly wish they never heard of him. Oh, if you’ve never read Rex Stout’s Nero Wolfe books, pick one up. You’re in for a treat.