At the Civil and Criminal Penalties Section meeting (at the larger ABA Tax Section May Meeting), a panel discussed tax crimes in a tax shelter context. Kevin Downing, a DOJ attorney heavily involved in these prosecutions, pronounced that tax shelter prosecutions are not about complex tax interpretations; rather, those prosecutions are about the "lie." The lie may appear in the context of complex tax interpretations, but it is still the lie that is the criminal problem. Of course a lie may be a flat out falsehood as to the law, but these shelters often appear in contexts that, even when they approach the too good to be true category, they have some semblance of tax superstructure to avoid being a flat out lie. Usually, in this context, it is the assumptions of the factual underpinnings for the legal interpretation superstructure that is the problem. Prominently mentioned in this context are factual representations from the taxpayer that he or she has a business or profit motive independent of the tax benefits sought and has a reasonable prospect of making a profit in excess of the transaction costs.
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