San Francisco’s Timothy Conn Vu is being sued by the United States to bar him from implementing, facilitating, and promoting allegedly abusive tax shelters and tax avoidance schemes. According to the complaint, Vu allegedly promoted a scheme that illegally avoided corporate income taxes on gains received from the sale of corporate assets, a so-called intermediary transaction tax shelter.
Additionally, Vu promoted a scheme that illegally avoided taxes on the gains from selling transferrable state tax credits (the State Tax Credit tax shelter), which real estate project owners typically sell to raise money to develop real estate projects. In many instances, Vu served as the sole officer, director, and/or manager of the five companies that were used to carry out these schemes and he signed many of the documents on behalf of those companies.
According to the complaint, in one version of the intermediary transaction, a company that Vu managed allegedly bought all of the stock of a closely held corporation shortly after that corporation had sold its assets to a third party. The asset sale generated capital gains tax. The complaint alleges that, once it owned the stock, the company that Vu managed allegedly offset the tax liability from the asset sale using a purported bad debt deduction based on bogus losses from a distressed asset debt (DAD) and/or distressed asset trust (DAT) tax shelter.
Vu, as an officer of the companies perpetrating these schemes, also signed and then filed with the Internal Revenue Service (IRS) many of the corporate income tax returns that claimed bogus losses to offset the income on which the corporations should have paid substantial federal taxes. The complaint alleges that Vu’s participation in these abusive tax schemes has generated more than $515 million in bogus tax deductions that have led to federal income tax deficiencies of at least $129 million.
For his role in the abusive transactions, Vu allegedly earned $3 million in compensation, according to the complaint. The lawsuit seeks to stop Vu from promoting these schemes in the future and to permanently bar him from preparing tax returns for others.
The promotion of tax schemes is one of the IRS’ Dirty Dozen Tax Scams for 2015. The IRS has some tips on its website for choosing a tax preparer, and has launched a free directory of federal tax preparers. In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters.
Related Federal Cases
- Edwin Forrest Ludwig III, Tax Fraud Scheme, California 2024 · North Carolina
- Sequoiya D. Harris, Tax Refund Scheme, California 2024 · California
- Jeremy Orr, Tax Evasion Scheme, California 2015 · California
- Nguyen Tax Fraud Scheme, San Jose CA, 2023 · Connecticut
- Shane Brightpath Mike, Tax Evasion Scam, California, 2023 · New Jersey
Key Facts
- State: California
- Category: White Collar Crime
- Source: DOJ Press Release ↗
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