Crypto and Conservation Easements are audited

Crypto tax firms will be hired as “outside contractors” that will help them audit cryptocurrency owners. The Internal Revenue Service (IRS) sent to cryptocurrency tax software firms like CryptoTrader.Tax. This can potentially refer to the IRS’ bid to enforce a potentially stricter tax regime for cryptos in the U.S. According to CryptoTrader.Tax, they received an email from the IRS back in May 2020 that says they are “soliciting private contractors to aid in the audits of cryptocurrency-related tax returns." An excerpt from the email reads: “The Internal Revenue Service is engaging outside contractors to assist our Revenue Agents in calculating taxpayers’ gains or losses as a result of their transactions involving virtual currency.” Forbes noted that the only possible reason IRS is hiring experts to help them provide consultancy services in auditing cryptocurrency transactions is that they have plans to expand the “volume and scrutiny of cryptocurrency audits.” The IRS has long defined cryptocurrencies as “properties” to put them within its regulatory ambit. Taxable events in cryptocurrency transactions include those that involve an exchange of cryptocurrencies, income generation from mining, and receipt of cryptocurrencies for goods and services. As many may recall, Forbes stated that back in 2017, the IRS filed legal action against Coinbase to get a hold of its list of account holders and their information. A year after that lawsuit, Coinbase had to turn over almost 13,000 names to the IRS. Most of these accounts received “soft letters” from the IRS warning them about complying with the tax regime that governs cryptocurrency transactions before a comprehensive audit is performed. The move of the IRS to look for contractors that can process the data IRS can compile potentially places a question on the anonymity of transactions performed within centralized exchanges like Coinbase. After all, cryptocurrency transactions tied to specific addresses on the blockchain can also be considered traceable too. The ongoing development in the bid of the IRS to tap cryptocurrency experts might just be the signal for crypto holders to expect a stricter tax regime in the days to come. If you own I suggest you get help NOW. A conservation easement is a securitized corporate structure that owns real estate. The landowner(s) sells the right to develop that land in exchange for favorable tax deductions. In many instances, investors are enticed with tax deductions worth multiples of the principal amount of the investment. These investment opportunities are pooled together so that they can be marketed and sold to a broad audience of investors across the country. In theory, there is less development and impact to the ecosystem, which makes the investments also appear socially conscious. Through a network of brokerage firms and Financial Advisors, retail investors are sold these opportunities and, in exchange, receive high commissions. However, the issuers of the conservation easements and the brokerage firms that are marketing and selling them to retail investors do not have opinion letters from the IRS confirming the advantageous tax treatment. The IRS and Department of Justice (DOJ) are believed to be narrowing in on selling groups who were involved in the marketing and sale of these fraudulent products. The conservation easement investments were among the “dirty dozen” investments. In a recently filed case against a large conservation easement issuer, Ecovest Capital, Inc., the Department of Justice alleges that the Ecovest conservation eastment was nothing more than “the sale of grossly overvalued federal tax deductions under the guise of investing in a partnership.” https://www.justice.gov/opa/press-release/file/1121451/download. The essence of the scheme involved the overvalued appraisal of the underlying property which, in turn, causes investors to improperly claim artificially inflated deductions on their personal tax returns. If and when the IRS determines that Ecovest and other conservation easement issues overstated the value of their properties in order to maximize the attractiveness of the investment, and nullifies the tax deductions, investors will potentially be on the hook for unpaid taxes in arrears, plus applicable penalties. In June 2020, the IRS announced a “time-limited settlement offer” to taxpayers with pending docketed Tax Court cases involving conservation easements. The IRS went on to say that it “will continue to actively identify, audit and litigate these syndicated conservation easement deals as part of its vigorous and relentless effort to combat abusive transactions,” said IRS Commissioner Chuck Rettig. “These abusive transactions undermine the public’s trust in private land conservation and defraud the government of revenue. Ending these abusive schemes remains a top priority for the IRS.” If your Financial Advisor recommended that you invest in conservation easements or other tax shelters, you may be able to recover your investment losses, including adverse tax consequences and penalties, through a FINRA arbitration claim. Contact Lance Wallach and his team of experts. They can help you get your money back. 516-236-8440 Wallachinc@gmail.com