By far the worst tax schemes in the view of the IRS are offshore (foreign) trusts. In fact, trusts of all sorts—domestic and foreign—are regularly abused.
First, not all trusts are bad. Many trusts serve a legitimate purpose, such as family trusts. (Family trusts are a device to avoid probate, and are used in many states. For tax purposes, these revocable trusts are ignored.) Survivors’ trusts are another useful vehicle.
But trusts set up to avoid income tax are abusive, and very much Bozo-like. Individuals and businesses have spent thousands of dollars trying to avoid taxes (in some cases, mid five-figure amounts)…and many times these tax structures have been challenged successfully by the IRS.
And those are the domestic trusts.
The foreign trusts are worse. These are usually organized just to avoid taxes and hide money. If you look at Schedule B on your tax return you’ll see that you are supposed to report your foreign trusts. They work great until the IRS finds out about them.
Remember: If it sounds too good to be true it probably is.