One doctor almost lost everything ………..
In 2006 Doctor X found himself in what he thought was the pleasant position of having a substantial amount of cash on hand that was not essential to the operation of his practice. That comfortable feeling did not last long. He quickly fell prey to a predatory insurance agent who sold him on the idea of Section 79 scam as a vehicle to obtain tax deductions.
Of course what really interested the insurance agent was the funding vehicle, a large life insurance contract with American General as the insurance carrier, which just happened to net the agent a large commission.
Unfortunately, the large, questionable tax deductions claimed by Doctor X indeed attracted the attention of the IRS. As a result of their audit, the IRS not only disallowed all of the tax deductions, but also imposed back taxes, an array of penalties, and interest, turning the doctor’s anticipated investment vehicle into something that could cost him everything he was saving and more. As if that weren’t bad enough, even that Draconian action was not the end of the story.
None of his so-called financial advisors had told Doctor X about IRC Section 6707A. Under this section of the Code, huge fines can be imposed on those who fail to inform the Service about participation in listed or reportable transactions, or transactions substantially similar to listed transactions.
Loosely defined, a reportable transaction is any transaction that has the potential for tax avoidance or evasion. Since he had no knowledge of this requirement, the doctor did not make the proper filings under Section 6707A, and is now also being threatened with monstrous fines for that failure to submit the proper forms in the proper format.
Although these issues had the potential for great disaster and great financial loss for this doctor, all the anxiety and stress he has been suffering over this matter may soon have a happier ending than he expected at its onset because he had the sense to contact us for help, perhaps just in the nick of time.
As a result of putting experts with a great deal of experience on his case, he now stands an excellent chance of having at least some of the penalties from the original audit abated. He will probably be able to recover the money that he sank into that large American General life insurance contract as well.
Sometimes a properly worded letter to the insurance company is all it takes. Last, but certainly not least, Doctor X also has an excellent chance of avoiding the large Section 6707A penalties, as our experts in the art of filing late without paying fines are currently at work on that as well.