Supreme Court Denies Cert in Murrin on Issue of Whether Taxpayer's Fraud is Required for § 6501(c)(1) Unlimited Statute of Limitations (6/22/26)

 Today, the Supreme Court denied the petition for certiorari in Murrin v. Commissioner (Sup. Ct. No. 25-988), docket here. See Order List dated 6/22/26, here at p.3, The Third Circuit opinion from which Murrin sought cert was Murrin v. Commissioner, 158 F.4th 527 (3rd Cir. 2025), here.

The question presented in the petition here was:

Whether, under 26 U.S.C. § 6501(c)(1), the IRS may assess tax beyond the Code’s three-year limitations period based solely on the fraudulent intent of a third-party, even when the taxpayer herself neither intended to evade tax nor knew of any wrongdoing.

The question as framed by the SG in the Commissioner’s Brief in Opposition here was:

Whether the indefinite limitations period in 26 U.S.C. 6501(c)(1) applies to a false or fraudulent return prepared by a tax return preparer who acted with the intent to evade tax.

Third Circuit Holds Tax Taxpayer Fraud is not Required for 6501(c)(1) Unlimited Statute of Limitations, Creating Conflict (8/18/25; 10/22/25)

Added 10/22/25 @ 3:40pm: On October 17, 2025, the Third Circuit denied rehearing and rehearing en banc and issued a revised opinion in Murrin v. Commissioner, ___ F.4th ___ (3rd Cir. 10/17/25), CA3 here and GS here. The revised opinion reaches the same result as the earlier opinion--fraud on the return permits the unlimited statute of limitations regardless of whether or not it is the taxpayer's fraud. I have not analyzed the opinion to see where precisely the changes were. The opinion is a straight-foward textualist reading of the Code provision. It is apparent that, as with the original opinion, the author is not that familiar with tax procedure. (See e.g., p. 4 n. 1, basically same as original opinion.)

In Murrin v. Commissioner, ___ F.4th ___ (3rd Cir. 8/18/25), CA3 here and TN here, the Court held that the §6501(c)(1), here, unlimited statute of limitations applying "In the case of a false or fraudulent return with the intent to evade tax" applies even without the taxpayer's personal fraud. The opinion is a straightforward textualist interpretation of the governing statute. Since the opinion is relatively short, I am not sure my nitpicking (aka pontificating) over the reasoning and specific text would be helpful to readers of this Blog, most of whom are already familiar with the issue.

In the event my thoughts may be helpful, I link here first my prior blogs generated by the search terms "allen fraud limitations" which picks up the blogs that discussed the issue. (If you click that link, the returns are first in some relevance scoring of the content order for the terms but there is a link to put them in reverse date order.) The more recent blog discussions that I think may be most helpful to readers wanting more than offered in Murrin are:

• On the Tax Court decision in Murrin: Tax Court Again Declines to Reconsider Its Holding that the Preparer's Fraud without the Taxpayer's Fraud Invokes Unlimited Statute of Limitations (Federal Tax Procedure Blog 1/25/24; 2/5/24), here (where I discuss and link Professor Bryan Camp's discussion of the Tax Court opinion in Murrin) (those reading the Third Circuit opinion in Murrin will see that Professor Camp filed an amicus in favor of the taxpayer's position).
• On BASR P’ship v. United States, 795 F.3d 1338 (Fed. Cir. 2015), which Murrin conflicts (Murrin substantially adopts the dissenting opinion in BASR), I did not write a separate blog on the BASR opinion, but I wrote one on the court awarding attorneys fees under § 7430: Major Attorneys Fee Award for BASR Partnership Prevailing on the Allen Issue in Federal Circuit (Federal Tax Procedure Blog 2/11/17), here. This conflict certainly insures a petition for cert by Murrin. I suspect that there may be a flurry of amicus briefs on the petition and, if cert is granted, on the merits briefing because a lot of wealthy taxpayers investing in fraudulent taxpayers have a dog in the hunt, so to speak.
• On City Wide Transit, Inc. v. Commissioner,  709 F.3d 102 (2d Cir. 2013) discussed in Murrin: Second Circuit Holds That Fraud on the Return -- Even If Not the Taxpayer's -- Causes an Unlimited Civil Assessment Statute of Limitations to Apply (Federal Tax Procedure Blog 2/4/13), here.
• My early venture into the subject discussing an important extension of a holding that the taxpayer's fraud is not required if the return is fraudulent: Civil Tax Statute of Limitations for Fraudulent Tax Shelters (Federal Tax Procedure Blog 12/19/09), here.

 This blog entry is cross-posted on the Federal Tax Procedure Blog, here.

Tax Court Again Declines to Reconsider Its Holding that the Preparer's Fraud without the Taxpayer's Fraud Invokes Unlimited Statute of Limitations (1/25/24)

 Long-time readers of this blog and the parallel blog Federal Tax Procedure may recall that I have had several postings on the issue of whether § 6501(c) unlimited statute of limitations for fraudulent returns requires (i) the taxpayer's fraud or (ii) may be a third party's fraud that is incorporated in the taxpayer's return without the taxpayer's fraud. The classic case is a preparer's fraud, but could also include fraud on an information return (such as a K-1 for partnership flow-through reporting).

At the end of this blog, I list significant Federal Tax Procedure or Federal Tax Crimes postings on the issue. Basically, the state of play was that the Tax Court held in a precedential decision that the taxpayer's fraud is not required. Allen v. Commissioner, 128 T.C. 37 (2007). The Court of Appeals for the Federal Circuit held that the taxpayer's fraud is required. BASR P'ship v. United States, 795 F.3d 1338 (Fed. Cir. 2015). In Finnegan v. Commissioner, 926 F.3d 1261 (11th Cir. 2019), the Court affirmed the Tax Court's Allen holding that the taxpayer waived the statute of limitations argument in the Tax Court.

In Murrin v. Commissioner, T.C. Memo. 2024-10, TA here, decided yesterday, the Tax Court held that Allen was still the interpretation the Tax Court will apply despite the holding in BASR. The Murrin opinion is 13 pages long and analyzes why BASR was not sufficiently persuasive to justify reconsidering its precedential holding in Allen.

BASR is not binding precedent in Murrin under the Tax Court's Golsen rule because appellate authority is only binding when in the Circuit to which an appeal would be taken in the case (barring stipulation otherwise). Mrs. Murrin lived in New Jersey when she filed the Tax Court petition. Thus, her appeal would be to the Third Circuit which has no authority in point, thus requiring the Tax Court to apply its own authority under Golsen.

RICO Claim Dismissed Against Bullshit Tax Shelter Promoters (11/19/19; 11/22/19)

In Menzies v. Seyfarth Shaw LLP, __ F.3d ___ (7th Cir. 2019), here, the Court dismissed a RICO claim arising out of an alleged fraudulent tax shelter peddled to the taxpayer (Menzies) by a lawyer, law firm and two financial services firms.  The Court held that fraudulent tax shelters can be subject of RICO claims, but Menzies had failed to properly assert the claims in the pleadings.

The particular shelter involved was of the bullshit shelters, often a topic discussed on this blog.  Here is my definition from my Tax Procedure books (Practitioner Edition p. 905 (footnotes omitted); Student Edition p. 616):

Abusive tax shelters are many and varied.  Some are outright fraudulent, usually wrapped in a shroud of paper work and cascade of words designed to mask the shelter as a real deal.  The more sophisticated are often without substance but do have some at least attenuated, if superficial, claim to legality.  Some of the characteristics that I have observed for tax shelters that the Government might perceive as abusive are that (i) the transaction is outside the mainstream activity of the taxpayer, (ii) the transaction is incredibly complex in its structure and steps so that not many (including IRS auditors, if they stumble across the transaction(s)) will have the ability, tenacity, time and resources to trace it out to its illogical conclusion (this feature is often included to increase the taxpayer’s odds of winning the audit lottery); (iii) the transaction costs of the arrangement and risks involved, even where large relative to the deal, offer a favorable cost benefit/ratio only because of the tax benefits to be offered by the audit lottery, (iv) the promoters (and other enablers) of the adventure make a lot more than even an hourly rate even at the high end for professionals (the so-called value added fee, which is often insurance type compensation to mediate potential penalty risks by shifting them to the tax professional or the netherworld between the taxpayer and the tax professional) and (v) the objective indications as to the taxpayer's purpose for entering the transaction are a tax savings motive rather than any type of purposive business or investment motive.   

More succinctly, Michael Graetz, a Yale Law Professor, has described an abusive tax shelter as “[a] deal done by very smart people that, absent tax considerations, would be very stupid.”  Other thoughtful observers vary the theme, e.g. a tax shelter “is a deal done by very smart people who are pretending to be rather stupid themselves for financial gain.”  Others have described the abusive tax shelters as “too good to be true.” 

I could not ascertain precisely what the steps in the fraudulent tax shelter scheme were other than, like Son-of-Boss transactions, the scheme created artificial losses that, presumably, offset the gain on sale of AUI stock, although it is not clear whether that gain was ever reported in order to use artificial losses. (I perhaps just missed something there.)  Here is the best explanation from Judge Hamilton’s dissenting opinion (Slip Op. 33-35):

Taxpayer Waived Argument that § 6501(c)(1) Requires Taxpayer's Fraud for Unlimited Statute of Limitations (6/14/19)

In Finnegan v. Commissioner, 926 F.3d 1261 (11th Cir. 2019), here, the 11th Circuit held that the taxpayers had waived the right to assert that § 6501(c)(1) required the taxpayer's own fraud for the unlimited statute of limitations.  Readers will recall that § 6501(c)(1) provides as an exception to the normal 3 year civil statute of limitations:

"In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time."

The Tax Court held in Allen v. Commissioner, 128 T.C. 37 (2007) that the taxpayer's own fraud was not required.  The Court of Federal Claims held in BASR Partnership v. United States, 795 F.3d 1338 (Fed. Cir. 2015), that the taxpayer's fraud was required.

The substantive issue is, of course, important because tax preparers can commit fraud on a return without the taxpayer engaging in the fraud on the return.  In addition, any number of enablers (such as preparers and tax shelter promoters) can commit fraud that finds it way on a return.  In either event, if all that is required is fraud on the return without the taxpayer's own participation in the fraud, then there is an unlimited statute of limitations.

The 11th Circuit did not address the merits of the split between the Tax Court in Allen and the Court of Federal Claims in BASR.  So, the merits of the issue is still open.  The important thing is that the Government is still asserting that Allen was correct -- that the taxpayer's fraud is not required for the unlimited statute of limitations in § 6501(c)(1).  The Government's brief is here.  I offer some brief excerpts from that brief stating the argument (but without the detail support for the argument):

[*2]  

"2. Whether the fraud exception under I.R.C. § 6501(c)(1), requiring 'a false or fraudulent return with the intent to evade tax,' applies where, as here, the taxpayer’s return preparer, and not the taxpayer, possessed the requisite intent." 

* *  * *

Tax Court Case Shows That the IRS Burden to Prove Fraud by Clear and Convincing Evidence Is Formidable Indeed (12/17/18)

In Matthews v. Commissioner, T.C. Memo. 2018-212, here, the taxpayer represented himself "pro se" to contest a deficiency with a year that was open based on the IRS determination of civil fraud.  The taxpayer prevailed because, the Court (Judge Vasquez) concluded, the IRS had not proved civil fraud by clear and convincing evidence, despite some acknowledged bad acts, including  lying to the agents, along the way.  The story is interesting because it shows just formidable the clear and convincing standard is.

The civil tax years in the Tax Court case were 2007 & 2008.  Previously, Matthews was originally indicted for tax evasion under section 7201 and subscribing to a false return under § 7206(1) for tax years 2004 through 2008.  A new prosecutor abandoned the tax evasion charges in a superseding indictment that charged (i) § 7206(1), tax perjury, for 2004 through 2008 and (ii) impeding the lawful function of the IRS, 7212(a) (tax obstruction).  Matthews was convicted of all charges, sentenced to a 27-month prison term, and the conviction was affirmed on appeal.  United States v. Mathews, 761 F.3d 891 (8th Cir. 2014), here.

According to a footnote (p. 17 fn 8), "SA Williams testified that the new prosecutor believed the sec. 7206(1) charges would make for a “cleaner case” than the sec. 7201 charges. As discussed infra, sec. 7206(1) does not require the Government to prove that the defendant intended to evade tax."  Note  to students and practitioners, this easier case to prove criminally beyond a reasonable doubt is often the reason that DOJ Tax foregoes a tax evasion charge ab initio, but one would have thought that DOJ Tax would have made the decision earlier.  Still, some prosecutors, particularly a new one on the block, could see the case differently and convince DOJ Tax to permit the "lesser charge" of tax perjury under § 7206(1).  (And, to close that loop, I have even had local prosecutors (AUSAs) with some gravitas with DOJ Tax convince DOJ Tax to forego criminal charges previously authorized based on their different assessments of the case.)

In the ensuing civil examination, the IRS determined that Matthews had unreported income and, based on the assertion of fraud, opened the statute of limitations and asserted the civil fraud penalty.  Matthews petitioned for redetermination to contest the fraud determination.  If successful, Matthews would owe no tax because the assessment statute of limitations had expired.

The fraud issue required that the IRS prove fraud by clear and convincing evidence.  The Court held that the IRS had failed to do so.  The Court held:

1.  Based on assessment of Matthews' credibility, the Court determined (pp. 22-31) that the IRS had failed to established fraud by clear and convincing evidence.  The aspect of the case turned upon credibility determinations.  I enclose below extended excerpts related to this credibility determination.

2.  The Court held (30-31) that the Section 7206(1) conviction was not issue preclusive on fraud.  This is a standard holding.

3.  Matthews was not bound to stipulations of fraudulent intent because contrary to record (pp. 31-33.)

Here are key quotes of interest to tax crimes practitioners who must be concerned with civil liabilities.

Attorney Fraud Resulting in Tax Court Decision; Can It Be Corrected? How? (10/16/18; 10/17/18)

This article caught my attention today:  Bruce Vielmetti, Former Foley & Lardner partner suspended for falsifying documents in IRS audit of Carmex family (Journal Sentinel 10/16/18), here.  The opening paragraph says:

A former Foley & Lardner partner was suspended two years Tuesday by the state Supreme Court for lying to the IRS during an audit of two wealthy estates connected to a major area business.  

So, I went to the Wisconsin Supreme Court opinion which is here.  I offer the pertinent portions relevant to the issue I address here as to whether and how the IRS can correct a tax under-assessed because of a Tax Court decision induced by fraud.

¶6 While working at the Foley firm, Attorney Wiensch provided estate planning services to a husband and wife who were owners of a privately owned business corporation. Attorney Wiensch prepared a trust under the terms of which the husband and wife were the trust donors and their children were the trustees and beneficiaries. Attorney Wiensch drafted an  Installment Sale Agreement, pursuant to which the husband sold most of his stock in the company to the trust in exchange for a promissory note in an amount in excess of $50 million based on the appraised value of the stock sold. The purpose of the stock sale was to transfer wealth to the clients' children, via the trust, free of gift and estate taxes and to ensure that any future appreciation of the stock held by the trust would not become part of the husband's estate. 

¶7 Transactions structured like the stock sale are reviewed by the Internal Revenue Service (IRS) to determine if the promissory note is a bona fide debt, or if the transaction should be treated as a taxable gift, or if transferred assets should be included in the seller's gross estate for purposes of determining the estate tax liability. Strategies used by estate planning professionals to minimize the risk of an IRS challenge to transactions such as the stock sale have included the use of personal guarantees by trust beneficiaries of a certain percentage of the sale price, often ten percent, or of a defined value formula clause that automatically adjusts valuation of the transferred assets based on a final determination by the IRS or a court. 

¶8 The husband died first, and pursuant to his estate plan, ownership of his remaining shares in the company passed to his wife as the surviving spouse. Attorney Wiensch was retained to represent the husband's estate. Attorney Wiensch prepared the estate tax return for the husband's estate and filed it with the IRS. The IRS audited the husband's estate tax return, as well as other gift tax returns filed on behalf of the clients for years prior to the husband's death.  

¶9 An IRS estate tax attorney served as the examiner for the IRS in conducting the audit. The IRS attorney corresponded with Attorney Wiensch in an effort to obtain information material to the audit. In September 2012, in response to requests from the IRS attorney, Attorney Wiensch sent the IRS copies of an Installment Sale Agreement, a Collateral Pledge Agreement, and a Guaranty of Specific Transaction. Attorney Wiensch represented to the IRS that the Installment Sale Agreement memorialized the terms of the stock sale and that the Collateral Pledge and Guaranty related to the stock sale. The copy of the Installment Sale Agreement Attorney Wiensch sent to the IRS in September 2012 contained a defined value formula clause. Attorney Wiensch altered and misdated the Installment Sale Agreement he sent to the IRS in September 2012. He did not prepare this document contemporaneously with the stock sale. The Installment Sale Agreement the husband actually executed on an earlier date did not contain the defined value formula clause.

New York Times Special Investigation Report on Trump Family Tax Avoidance/Evasion (10/2/18; 10/3/18)

The NYT has this report:  Trump Engaged in Suspect Tax Schemes as He Reaped Riches From His Father (NYT 10/2/18), here.

Some interesting excerpts without getting too much into the details laid out:

The line between legal tax avoidance and illegal tax evasion is often murky, and it is constantly being stretched by inventive tax lawyers. There is no shortage of clever tax avoidance tricks that have been blessed by either the courts or the I.R.S. itself. The richest Americans almost never pay anything close to full freight. But tax experts briefed on The Times’s findings said the Trumps appeared to have done more than exploit legal loopholes. They said the conduct described here represented a pattern of deception and obfuscation, particularly about the value of Fred Trump’s real estate, that repeatedly prevented the I.R.S. from taxing large transfers of wealth to his children. 

“The theme I see here through all of this is valuations: They play around with valuations in extreme ways,” said Lee-Ford Tritt, a University of Florida law professor and a leading expert in gift and estate tax law. “There are dramatic fluctuations depending on their purpose.” 

The manipulation of values to evade taxes was central to one of the most important financial events in Donald Trump’s life. In an episode never before revealed, Mr. Trump and his siblings gained ownership of most of their father’s empire on Nov. 22, 1997, a year and a half before Fred Trump’s death. Critical to the complex transaction was the value put on the real estate. The lower its value, the lower the gift taxes. The Trumps dodged hundreds of millions in gift taxes by submitting tax returns that grossly undervalued the properties, claiming they were worth just $41.4 million.

JAT Comments:

The Tax Court Sticks to Its Allen Holding that the Taxpayer's Fraud is not Required for § 6501(c)(1)'s Unlimited Statute of Limitations (6/17/16; 6/20/16)

I have previously blogged on the issue of whether the unlimited statute of limitations for fraud in § 6501(c)(1), here, requires the taxpayer's personal fraud or, on the other hand, merely a fraudulent position as a result of someone else's fraud (such as a return preparer).  The issue rose to prominence after the Tax Court's decision in Allen v. Commissioner, 128 T.C. 37, 40 (2007) which held that the taxpayer's personal fraud was not required; all that was required, according to Allen, was fraud on the return without regard to the taxpayer's personal culpability.  The Second Circuit seemed to agree in City Wide Transit, Inc. v. Commissioner, 709 F.3d 102 (2d Cir. 2013).  But, the Court of Appeals for the Federal Circuit did not agree (at least two of three judges on the panel did not agree).  BASR P'ship v. United States, 795 F.3d 1338 (Fed. Cir. 2015).  The Government did not seek rehearing or certiorari in BASR, so that matter seemed to be practically resolved because taxpayers could choose to litigate the issue in the Court of Federal Claims (governed by its Court of Appeals, the Court of Appeals for the Federal Circuit).

But, there will be cases with the issue that are not litigated in the Court of Federal Claims.  One just was.  Finnegan v. Commissioner, T.C. Memo. 2016-118, here.  There, the return preparer fraudulently prepared the return.  Allen of course was the governing authority in the Tax Court, so the Tax Court was bound to follow Allen unless it chose to reconsider Allen.  It chose not to.  The relevant portion of the opinion is short, so I quote it in full (Slip Op. pp. 17-18):

OPINION 

We must decide whether respondent has proved that petitioners’ returns were prepared falsely or fraudulently with the intent to evade tax.

I. Limitations Period 

We begin with an analysis of the limitations period for assessment of income tax. The Commissioner generally must assess any income tax within the three-year period after a taxpayer files his or her return. Sec. 6501(a). In the case of a false or fraudulent return with the intent to evade tax, however, tax determined to be due may be assessed at any time. Sec. 6501(c)(1). In Allen v. Commissioner, 128 T.C. at 42, we held that section 6501(c)(1) applies even if it is the preparer of the return, and not the taxpayer, who falsely or fraudulently  prepared the return with the intent to evade tax. But see BASR P’ship v. United States, 113 Fed. Cl. 181 (2013), aff’d, 795 F.3d 1338 Fed. Cir. (2015). n6
   n6 We see no reason to revisit Allen v. Commissioner, 128 T.C. 37 (2007), on account of BASR P’ship v. United States, 113 Fed. Cl. 181 (2013), aff’d, 795 F.3d 1338 (Fed. Cir. 2015). In the Court of Appeals for the Federal Circuit’s opinion, a persuasive dissent was filed, as well as a concurring opinion that relied on sec. 6229, a provision inapplicable in the instant case. Accordingly, even in cases appealable in the Federal Circuit, it is unclear whether, in the absence of the application of sec. 6229, which interpretation of sec. 6501(c)(1) would prevail. Moreover, there is no jurisdiction for appeal of any decision of the Tax Court to the Court of Appeals for the Federal Circuit. Sec. 7482(a)(1). Additionally, the parties have not cited BASR P’ship and do not contend we should revisit Allen. Thus, Allen is controlling precedent in the instant case, and we do not revisit the analysis and conclusion in that Opinion.

Sam Wyly's Continuing Travails -- the Bankruptcy Edition (5/15/16; 5/21/16)

I have previously written about the travails, visited upon themselves, by the Wyly brothers, Sam and Charles, very wealthy men who decided that they did not have to play by the rules.  All blog entries on the Wyly's are here.  The Wyly brothers lost a previous round on disgorgement by the SEC.  See Wylys Ordered to Disgorge Hundreds of Millions of Tax Benefits With Interest (Federal Tax Crimes Blog 9/27/14), here.

The latest chapter is a bankruptcy decision involving Sam Wyly, Charles Wyly and Charles' wife, Dee Wyly.  In re Samuel Evans Wyly, et. al. (Bkr No. 14-35043-BJH 5/10/16), here (because of the length of the opinion, I have used the Adobe bookmarking feature to bookmark in outline format because of its length; readers can download and use the bookmarks to more easily move around the lengthy document).  [JAT Note I just discovered on 5/21/16 that I had the wrong link to the opinion; I have corrected that and apologize to readers.]  The opinion is 459 pages (including Exhibits).  Without exhibits and excluding the table of contents, the opinion is 427 pages long.  This is a substantial read, depending on the level the reader chooses to drill down into the opinion.  For those merely wanting the judge's own summary, see the Conclusion which is 9 pages, beginning on p.418 and ending on page 427.  The bottom line (my summary of the judge's summary as to the key holdings):

1.  The issues (p. 418, footnote omitted):  "First, did Sam and Charles commit tax fraud? Second, if they did, what role, if any, did Dee have in that fraud?"

2. The conclusion as to Sam and Charles (p. 419):  "the Court is convinced — by clear and convincing evidence — that Sam and Charles committed tax fraud."

3.  The linchpin for the offshore structure was that a key trust created in 1992 was a nongrantor trust as to Sam and Charles.  Although Sam and Charles, through their advisor, received a number of opinions as to various facets of the structure, he never received an opinion that this key nongrantor trust linchpin was met until 2003.  Actually in 1993, Sam's and Charles' advisor had been told by a lawyer that an expert on this subject had concluded that there was a "significant risk" that the trust would be characterized as a grantor trust, which would defeat the planning.  At that point, the lawyer advised that the Wylys needed a real nongrantor trust settled by someone other than Wylys so that the Wylys were not grantors.  The characteristics of such a nongrantor trust were:

(i) the grantor of the trust has known the Wylys “for a considerable period of time,” (ii) the trust is being established as “an entirely gratuitous act,” and (iii) the grantor has not received and will not receive any “consideration, reimbursement or other benefit” for settling the trust, “directly or indirectly.”

4.  Then, pursuant to the advice, "an individual residing in the IOM [Isle of Man] who Sam barely knew, King, settled a trust in February 1994 naming Sam and his family members as beneficiaries."  The factual predicates stated in the documents for the new trust were false.  But, Sam began acting as if the façade was real.

Sam starts transacting business through it offshore by undertaking two more complicated private annuity transactions in 19961672 and a myriad of extremely complicated real estate transactions involving, among other things, homes, an art gallery, and an office for himself and other family members in Texas and Colorado in the late 1990s and early 2000s1673—all tax and reporting free.

5.  Sam then causes to be settled a similar supposed nongrantor trust through the façade of a stranger, again with false statements in the documents.  The Court takes the trouble to quote the key lies in its Conclusion, so here it is with the nominal nongrantor making the statement:

I wanted to take this opportunity to let you know what a pleasure it has been knowing you over the past years and dealing with you on both business and social matters. I appreciate your many courtesies. As you know, I have established a trust with Wychwood Trust Limited, called The La Fourche Trust, for the benefit of you and your family, and have provided this trust with the sum of $25,000.00. This is to show my gratitude for your loyalty to our mutual ventures and your personal support and friendship. I hope that, wisely managed, this trust fund can grow for many years and inure to the benefit of many generations of your family.

The Court says "All of this is a lie, except that the La Fourche IOM Trust was established with Wychwood Trust Limited."  [Those who have watched bullshit offshore planning will easily recognize this type of façade built on lies.]  Based on the lies and the façade of a nongrantor trust, a legal opinion was then forthcoming that the structure depending on the façade would work tax magic.  Of course, Sam claimed not to know about the lies (meaning, if believed, Sam's own lawyer had kept him in the dark), but the Court notes:

did Sam not wonder why King and Cairns, one individual he barely knew and the other who he did not know at all, each settled a trust with $25,000 in the IOM and named him and his wife and children as beneficiaries? Perhaps that happens all the time in Sam’s life, but if it happened in mine, I would be asking questions—lots of them.

Court of Appeals for Federal Circuit Holds that Fraud of the Taxpayer (Or Someone Closer to the Taxpayer than the Fraudster) is Required for Section 6501(c)(1) Unlimited Statute of Limitations (7/30/15; 7/31/15)

In BASR P'ship v. United States, 795 F.3d 1338 (Fed. Cir. 2015), here, the Court of Appeals for the Federal Circuit held that the unlimited statute of limitations for fraud in Section 6501(c)(1) required the taxpayer's fraud or, at least, a nonremote third party's fraud.  The fraudster in the case -- named Mayer, a promoter-lawyer of a fraudulent Son-of-Boss bullshit tax shelter -- was too remote even though the taxpayer reported the fraudster's fraud on the taxpayer's return.  There's a lot in the statement of the case, so let's unpack it.

Let's start with the statute.  Normally, the statute provides a three year statute of limitations.  § 6501(a).  There is a six-year statute of limitations for 25%+ gross income omissions, but the Supreme Court held in United States v. Woods,     U.S.    , 134 S. Ct. 557 (2013) that magic basis creation shelters such as Son-of-Boss (involved in BASR) did not result in a 25% omission.  Section 6501(c)(1) provides an unlimited statute of limitations as follows:

(c) Exceptions
(1) False return
In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.

The issue in BASR was whether these words required the taxpayer's personal fraud (or at least the fraud of someone closer to the taxpayer than Mayer) or whether Mayer's fraud alone would suffice. From a pure textual standpoint, the text does not require the fraud of the taxpayer or someone closer than Mayer.  The return has to be "false or fraudulent . . . with the intent to evade tax."  There was no question that Mayer intended to evade the taxpayer's tax liability.  Since the bare text of the statute did not require the taxpayer's fraud.or the fraud of anyone closer to the taxpayer, this textualist reading would permit the unlimited unlimited statute of limitations to apply. That was the reasoning of the Tax Court held in Allen v. Commissioner, 128 T.C. 37 (2007).

The Court of Appeals for the Federal Circuit reached a different result based by going beyond the text to discern an interpretation that required the taxpayer's fraud (or, possibly, the fraud of someone closer to the taxpayer).  This is a classic statutory interpretation clash.  I think the opinions reasonably lay out the approaches.  I could offer readers nothing of value by summarizing the approaches or critiquing them.  So I urge readers with an interest in the subject to review the opinions -- the majority, the concurrence also discussing a different issue not resolved in the case and the dissent on the issue resolved in the case.  Basically, the majority opinion concludes that, based on all the context other than the text that it finds material, it can bend the text to supply the requirement for taxpayer fraud (or fraud of someone closer to the taxpayer than Mayer).  The dissenter concludes that, based on all of the context that she finds material, she can justify reading the text as written -- not to require the taxpayer fraud.

More on the Allen Issue - Oral Argument in BASR (4/17/15)

With too much time on my hands, I decided to listen to the oral arguments in the Court of Appeals for the Federal Circuit in  BASR Partnership v. United States, 113 Fed. Cl. 181 (9/30/13 Filed; As Revised 10/29/13), here.  The oral argument may be downloaded here.  For background discussion of the case, see BASR Briefs On Issue of Unlimited Statute of Limitations for NonTaxpayer Fraud (Federal Tax Crimes Blog 8/26/14), here.  I will give some off-the-cuff impressions after the oral argument.

Here is how I slice and dice it (perhaps simplistically):

1.  The issue is whether § 6501(c)(1), here, applies to nontaxpayer fraud.

2.  The plain meaning of § 6501(c)(1) requires fraud but does not textually differentiate between the taxpayer's fraud and any other persons' fraud.  That does not resolve the issue stated in #1, because textual reading does not always control.  I cannot predict whether the Court of Appeals for the Federal Circuit will go outside the bounds of the text.

3.  Much of the oral argument dealt with esoterica of the TEFRA partnership provisions.  I think that is pretty much irrelevant if, as the Government argues and the Court of Federal Claims has already held, Section 6501 is the applicable statute of limitations, then any minimum statute of limitations in § 6229, here, shorter than the § 6501 statute is irrelevant.  But that simply begs the questi§ 6501(c)(1), properly interpreted, applies to nontaxpayer fraud.

4.  I previously thought it relevant that the Government's reading of § 6501(c)(1) might moot § 6229(c)(1)'s prescription of a 6-year statute for fraud on the partnership return not involving the partner committing the fraud.  If § 6501(c)(1) nevertheless prescribes an unlimited statute for a partnership fraudulent item flowing through to the nonfraudulent partner's return, then § 6229(c)(1)'s 6-year statute is irrelevant because it will always be shorter than the § 6501(c)(1) unlimited statute.  On more reflection, this concern seems to be a superficial one. Congress' enactment of a provision that, depending upon the interpretation of an earlier enacted statute, might be rendered irrelevant does not mean that the earlier enacted provision should be interpreted to avoid the irrelevancy.  All the subsequent enactment shows is that Congress in the subsequent enactment either did not think of its interaction with the earlier statute or misconstrued the scope of the earlier statute.  It does not mean that the earlier statute properly interpreted cannot apply as properly interpreted.  Stated alternatively, Congress did not by § 6229(c)(1) amend § 6501(c)(1), so the issue should be how § 6501(c)(1) should be interpreted in the absence of § 6229(c)(1).  And, even if Congress in enacting § 6501(c)(1) had said in the legislative history that it meant to amend § 6501(c)(1) or based its language in § 6229(c)(1) on an assumption that § 6501(c)(1) would not apply, then the enactment would have no effect on the interpretation of § 6501(c)(1).

Bullshit Tax Shelter Salesman Avoids Fraud Finding for Investment in Bullshit Tax Shelter (4/8/15)

In Jacoby v. Commissioner, T.C. Memo. 2015-67, here, the Tax Court relieved a bullshit tax shelter salesperson who drank his own poison from liability for the tax and penalties (and, as a result, the interest thereon).  How did / could that happen?  The short answer is - I don't know.  The opinion is quite cryptic.  Which may be the answer -- it may be just a mystery.

So, let's wade into the cryptic opinion.

1.  Jacoby had an accounting degree and a law degree.

2.  He had a short stint with a major accounting firm doing financial audit (not tax) work.  In 1987, he joined Twenty-First Securities Corp., a major player in the sophisticated tax strategy market.  He focused on strategies for high net worth individuals and large companies.  The strategies he sold were developed by others in the firm or outside the firm.  During the 9 years he worked there, he earned between $5 and $6 million.  Obviously, he learned enough about the working of the strategies to sell them to others.  (JAT comment:  One example of a strategy developed by Twenty-First Securities is the strategy blessed blasted by the Tax Court and then blessed by the Fifth Circuit in Compaq Computer Corp. v. Commissioner, 113 T.C. 214 (1999), rev’d 277 F.3d 778 (5th Cir. 2002); I have no idea whether Jacoby worked on that strategy, but that strategy was apparently in-house while he was with First Securities.

3.  In 1996, Jacoby joined Diversified Group Inc. ("DGI"), a tax shelter boutique run by James Haber.  DGI and Haber were major players in the bullshit tax shelter market.  See also e.g., Ironbridge v. Commissioner, T.C. Memo. 2012-158 (noting that, "Although he has not been indicted or tried, the principal of petitioners, James Haber, believes he was one of the persons involved in the criminal investigation.Mr. Haber stated during deposition testimony that he believes he became a potential “target” of the criminal investigation around “2002 or 2003;" lot more history there, but not developed in the Jacoby opinion, so I pass for now).  The Jacoby opinion says that Jacoby was interviewed in the criminal investigation, agreed to extend the statute of limitations for criminal prosecution, but was never prosecuted.  (Haber was never prosecuted either.)

4. Jacoby's arrangement with DGI was a joint venture agreement ("JVA") with Jacoby's company, SMD Capital Corp. ("SMD"), through which he would get 50% of the net profits from business he brought to DGI.

Yet Another BullShit Tax Shelter Goes Down Flaming (1/25/14)

In NPR Investments, LLC v. United States, 740 F.3d 998 (5th Cir. 2014), here, following the Supreme Court's lead in United States v. Woods, ___ U.S. ___, 134 S. Ct. 557 (2013), here, the Fifth Circuit applied the 40% gross valuation misstatement penalty to the partnership's bullshit tax shelter (the Son-of-Boss (SOB) type shelter).  For discussion of Woods, see Supreme Court Applies 40% Penalty to Bullshit Basis Enhancement Shelters (Federal Tax Crimes Blog 12/3/13), here. The 40% penalty will, of course, be applied to the partners, which will then permit them to assert in a separate refund proceeding any partner level defenses they may be entitled to.

I could perhaps leave it at that, but there are some interesting features of the case.

Let's start with some the facts recounted by the Court:

Harold Nix, Charles Patterson, and Nelson Roach are partners in the law firm of Nix, Patterson & Roach, LLP. They represented the State of Texas in litigation against the tobacco industry and in 1998 were awarded a fee of approximately $600 million that is to be paid over a period of time. They also received fees totaling approximately $68 million in connection with tobacco litigation in Florida and Mississippi. Nix, Patterson, and Roach share the fees 40%, 40%, and 20%, respectively. 

Nix and Patterson have participated in at least two "Son-of-BOSS" tax shelters. BOSS stands for "Bond and Options Sales Strategy." Courts, including our court and the district court in this case, have described a Son-of-BOSS transaction as "a well-recognized 'abusive' tax shelter." Artificial losses are generated for tax deduction purposes. 

Before creating NPR and engaging in the transactions at issue in this appeal, Nix and Patterson invested in another Son-of-BOSS tax shelter, known as BLIPS. It involved sham bank loans, and our court considered various tax issues related to Nix's and Patterson's transactions with regard to that shelter in Klamath Strategic Investment Fund ex rel. St. Croix Ventures v. United States.

Further, here is a critical fact conceded apparently for strategic reasons:

The joint pre-trial order in the district court reflects that NPR, Nix, Patterson, and Roach conceded that NPR lacked a profit motive during 2001.

 All of the "investors" in SOB shelters claimed that their profit motive inhered in some long-shot investment razzle-dazzle which they called the "sweet spot," wherein the economic circumstances would line up to generate a profit from the adventure. Some of the taxpayers involved, although having large otherwise uncovered income, claimed that they did not consider the tax consequences at all but focused instead solely on the sweet spot opportunity.  However, the taxpayers in NPR (the ultimate taxpayers were involved by the attorney R.J. Ruble (since convicted of tax crimes for his participation in tax shelters, including SOB shelters) apparently did consider the tax consequences (duh!):

Judge Holmes of the Tax Court Sets up the Allen Issue Conflicts (11/14/13; revised 11/16/13)

I have previously blogged on the Allen issue -- whether Section 6501(c)(1)'s unlimited statute of limitations may be triggered by fraud on the return that is not the taxpayer's fraud.  See Allen v. Commissioner, 128 T.C. 37 (2007), here.  The key blogs are listed below.  In a recent Tax Notes article summarizing some of the events at the California state bar tax section conference, the following was noted (Kristen A. Parillo, IRS Will Soon Examine U.S. Taxpayers With Undeclared Indian Bank Accounts, 2013 TNT 219-4 (11/13/13)):

Tax Court Judge Mark V. Holmes gave an overview of noteworthy judicial developments, including the Court of Federal Claims' September 30 decision in BASR Partnership v. United States, No. 1:10-cv-00244 (Fed. Cl. 2013) 2013 TNT 211-10: Court Opinions. That decision is "jurisprudentially interesting," Holmes said, because its holding is at odds with a 2007 Tax Court decision regarding whose fraudulent intent is required under section 6501(c)(1) to extend the three-year statute of limitations period for assessment of income taxes. 

In BASR Partnership, the court held that the phrase "intent to evade tax," as it is used in section 6501(c)(1), is limited to cases in which the taxpayer has the requisite intent to commit fraud. The court said that section 6501(a) is expressly limited to a return filed by the taxpayer; by implication, section 6501(c) is limited to fraud by the taxpayer, it concluded. (Prior coverage 2013 TNT 191-3: News Stories.) 

That reasoning is at odds with the Tax Court's decision in Allen v. Commissioner, 128 T.C. 37 (2007) 2007 TNT 44-11: Court Opinions, in which the court held that a preparer's fraudulent intent to evade tax is sufficient to keep the limitations period open. "Nothing in the plain meaning of the statute suggests the limitations period is extended only in the case of the taxpayer's fraud," the court wrote, adding that the statute "keys the extension to the fraudulent nature of the return, not to the identity of the perpetrator of the fraud." 

"So we have the express language canon, I suppose, going up against the plain language canon," Holmes said. "Something will have to give. Both of these opinions are relatively short, given the depth of material that one can bring to this issue." 

Holmes noted that Bryan T. Camp of Texas Tech University School of Law wrote several articles after the Tax Court's Allen decision in which he traced the legislative history of section 6501(a). According to Camp's research, the concepts of "false or fraudulent return" and "intent to evade tax" date back to the Revenue Act of 1862. Based on the legislative history, Camp concluded that "the section 6501(a) assessment limitations period represents a very strong public policy choice in favor of closure," such that "the fraud exception should be read to refer to the taxpayer's fraud and not the fraud of a third party such as a return preparer." (See "Tax Return Preparer Fraud and the Assessment Limitation Period," Tax Notes, Aug. 20, 2007, p. 687 2007 TNT 162-30: Viewpoint, and "Presumptions and Tax Return Preparer Fraud," Tax Notes, July 14, 2008, p. 167 2008 TNT 136-33: Viewpoint.)

Court of Federal Claims Holds that Unlimited Civil Statute of Limitations Requires Taxpayer's Fraud (10/3/13)

BASR Partnership v. United States, 113 Fed. Cl. 181 (9/30/13 Filed; As Revised 10/29/13), here, the Court of Federal Claims (Judge Susan G. Braden), in a partnership TEFRA proceeding, held that Section 6501(c)(1), here, required the taxpayer's fraudulent intent in order for the unlimited statute of limitations to apply.  In so holding, the Court rejected the reasoning and holding of Allen v. Commissioner, 128 T.C. 37, 40 (2007), here and here., and of the Second Circuit in City Wide Transit, Inc. v. Commissioner, 709 F.3d 102 (2d Cir. 2013), here and here.  (Note:  I think the is Judge Braden's bottom-line holding, although one has to work through the TEFRA context and special Section 6229 rules to get there; see the TEFRA summary at the end of the blog.)

In BASR, the partnership reported a fraudulent tax shelter item that, under the partnership reporting rules found its way to the ultimate taxpayer's returns in a way that was less visible to the IRS.  Apparently in order to test the legal position that Section 6501(c)(1) applied at the partnership level solely by virtue of the return finding its way to individual taxpayer's return, the IRS did not urge that the taxpayers signing the ultimate returns had the required fraudulent intent.  Hence, the only issue was whether the reporting of a fraudulent item on the ultimate taxpayers' returns was alone sufficient to invoke Section 6501(c)(1).

The statutory text at issue is as follows (Section 6501(c)(1)):

(1) False return. -- In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.

Textually, there is no requirement that the requisite intent be the taxpayer's intent.  Read literally, therefore, fraud on the return will invoke Section 6501(c)(1).  Essentially, that is the holding of the Judge Kroupa in Allen.  Judge Kroupa in Allen just could not find any other persuasive interpretive sources that could permit her to say that the statute should be read to limit the "intent" to the taxpayer's intent.

A literalist or strict constructionist such as Justice Scalia would, I project, have reached the same conclusion as Tax Court Judge Kroupa.  The statute appears plain on its face and contains no explicit or implicit ambiguity regarding who must be the author of the fraud that is on the return.

The question is whether there are other sources for interpretation that would permit a court to hold that a limitation that it be the taxpayer's fraudulent intent can be read into the text (meaning, I supposed, that the text is not so plain when the other sources are consulted).  When and how courts undertake such an extra-textual inquiry is a broad subject in the law, so I cannot do little more than say that it is undertaken if the reviewing court finds the text itself not to be plain.  It all depends upon what plain is.  That is the process that Judge Braden undertook.

Judge Braden started her analysis with Section 6501(a) which states the general rule that the assessment statute of limitations is three years from the date the return is filed.  Judge Braden noted the following text in Section 6501(a) that the return in question is  "the return to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer received an item of income gain, loss, deduction, or credit)."  In other words, for example, a partnership return does not affect the application of Section 6501(a) to the partner's return even though the partner reports partnership items.  That is an unstartling proposition.

Articles of Interest to Tax Crimes Enthusiasts (6/27/13)

These are some new articles.  Enjoy!

• Stever Toscher and Della Bauserman, Suprise-The Tax Fraud of YOur Tax Preparer May Extend the Statute of Limitations on Tax Assessments, J. Tax Prac. & Proc. 31 (April-May 2013), here.

The authors review the wreckage from Allen v. Commissioner, 128 T.C. 37 (2007).  Although I have written about Allen before, this excerpt should remind readers. 

The issue in Allen was whether the taxpayer must have an intent to evade tax in order to keep the statute of limitations on assessment open indefinitely under Code Sec. 6501(c)(1). The Tax Court concluded the statute of limitations would remain open if the tax preparer had the intent to evade tax. To state this conclusion another way, the Tax Court allowed the statute of limitations on assessment to remain open forever  when the tax preparer has fraudulently filed a tax return even if the innocent taxpayer was also defrauded by the tax preparer. This was a startling proposition—at least at first blush—for most of us in the tax litigation field.

• Josh Ungerman, What to Do When the Special Agent Arrives (Outline for speech at the Tax Alliance Conference 6/12/13), here.

Josh offers some good insights on the initial surprise "interview" by Special Agents and then damage control after it occurs.

• Charles P. Rettig, IRS Offshore Voluntary Disclosure Program: Opt-Outs, a Revised FBAR and Rescissions of Pre-Clearance Letters by Criminal Investigation, J. Tax Prac. & Proc. 23 (April-May 2013), here.

Chuck provides some timely information about developments in the offshore account area, including most prominently (i) summary observations on joining OVDP in the first place and then in opting out and (ii) lines of inquiry that might be asked by the agent on the opt out or an AUSAs or IRS agent assisting a grand jury investigation of enablers.

• Edward M. Robbins, Jr., The Fifth Amendment FBAR Lives!, 139 Tax Notes 1546 (June 24, 2013) [no link for this yet, but will post it when I get it; in the meantime, readers might check his firm's publications page here]

Statute of Limitations on Taxpayers' Claims Against Enablers of Bullshit Tax Shelters Starts on Issuance of FPAA (4/12/13)

In McMahan v. Deutsche Bank, 2013 U.S. Dist. LEXIS 49439 (ND IL 2013), here, the plaintiffs sued certain tax shelter-enablers for damages from their promotion to plaintiffs of certain Daugerdas related Son-of-Boss shelters (also called bull-shit tax shelters).  (Readers will recall that Daugerdas and some of his colleagues were prosecuted and convicted for SOB shelters; all but one of the convictions were reversed for juror misconduct, but the defendants whose convictions were reversed will be retried and one has already pled guilty.)

The defendants in this civil case, being displeased with having been sued, moved to dismiss some of the claims.  The court granted some of the defendants requests and denied others.  I focus on the defendants' motion to dismiss because the suit was outside the statute of limitations.

The key facts (accepted by the judge to test the motions; as I present some of these, they are extrapolations from the sparse facts offered in the opinion but the extrapolations are almost certainly in the complaint) are that the plaintiffs were promoted into the bogus tax shelter by the defendants who knew the shelters were bogus but did not warn the plaintiffs.  Indeed, not only did they not warn, they affirmatively misrepresented that the shelter worked (well, at least that it more likely than not worked).  The IRS ultimately discovered the false claims on the returns.

On October 26, 2010, the IRS issued a Notice of Final Partnership Administrative Adjustment (FPAA), in which Plaintiffs were advised that an increase in tax basis of $2,075,000 relating to the Son of BOSS investment was disallowed. As a result, Plaintiffs owed the IRS hundreds of thousands of dollars in additional taxes, penalties, and interest payments.

Plaintiffs assert that defendants' misbehavior is actionable on various a host of grounds.

The court rejected the defendants' statute of limitations argument as follows:

District Court Denies Bankruptcy Discharge for BLIPS Shelter Investor (4/4/13)

I previously reported on a Bankruptcy Judge's Order applying 11 USC 523(a)(1)(C), here, denying a KPMG BLIPS tax shelter investor a discharge in bankruptcy for the taxes, penalties and interest arising from that misguided adventure.  BLIPS Tax Shelter Investor Denied Bankruptcy Discharge for Fraudulent Return and Evasion (Federal Tax Crimes Blog 1/10/12), here.  The district court has now sustained the Bankruptcy Judge's order.  Vaughn v. United States, 2013 U.S. Dist. LEXIS 45516 (D CO 2013), here.

Key excerpts from the district court's Opinion and Order Affirming Bankruptcy Decision are (most footnotes omitted):

Mr. Vaughn asserts error in the Bankruptcy Court's determinations under 11 U.S.C. §523(a)(1)(C) that he: (i) made a fraudulent tax return and (ii) willfully attempted to evade or defeat taxes owed for years 1999 and 2000. The IRS asserts error in the Bankruptcy Court's denial of its Motion for Summary Judgment in which it sought a determination that the taxes owed for 1999 and 2000 were non-dischargeable pursuant to 11 U.S.C. § 523(a)(1)(A). The Court begins with Mr. Vaughn's challenges. 

Under 11 U.S.C. § 523(a)(1)(C), tax debts can be excluded from discharge on two alternative grounds: (i) making a fraudulent return or, (ii) willfully attempting to evade or defeat a tax. The Bankruptcy Court determined that Mr. Vaughn's tax debt was excepted from discharge on both grounds. Mr. Vaughn challenges both determinations, but in order for this Court to reverse the finding of non-dischargeableability of the tax debt, Mr. Vaughn must show that both determinations are erroneous. Because the Court finds no error with regard to the Bankruptcy Court's determination that Mr. Vaughn willfully attempted to evade his 1999 and 2000 tax obligations, it is unnecessary to address the interesting issues raised by Mr. Vaughn with regard to the Bankruptcy Court's finding that he filed a fraudulent tax return. For the same reason it is not necessary to explore the issues raised by the IRS in its cross-appeal.

Statutes of Limitations for FBAR Noncompliance Related to Tax Noncompliance (3/12/13)

A person commenting on an earlier blog asked the following question (modified slightly for clarity):

Does the statute of limitations for the FBAR penalty (both civil and criminal) toll if the taxpayer is outside the U.S.? 

I answered at least the criminal part of the question in a comment reply.  I thought the question was worthy of a blog entry to expand the reply and alert readers who may not work their way to the comment and reply.

Suspension of the FBAR Criminal Penalty Statute of Limitations

Before I answer the question, I should first state why the question may be important.  A U.S. person with a concern of criminal prosecution for FBAR violations may absent himself from the U.S. until the statute has run on the FBAR violations and thereby hope to avoid prosecution.  That person, of course, would want to become compliant prospectively upon adopting the strategy, if it worked, so that, with enough time (5 years for FBAR prosecution), the risk of FBAR prosecution would go away.

With that background, I think the direct answer is that the FBAR criminal statute of limitations would be tolled (or suspended). 18 USC 3290, here, provides simply and cryptically "No statute of limitations shall extend to any person fleeing from justice." Title 18 is the general criminal code.  The immediate question, of course, is whether  § 3290 applies to crimes outside Title 18, such as the FBAR crime codified in Title 31.   I have not researched the issue in great detail.  But I did find a case where for an immigration crime (18 USC 1326, felony re-entry), the  Second Circuit applied  § 3290.  United States v. Rivera-Ventura, 72 F.3d 277, 284 (2d Cir. 1995).  Section 3290 requires that the person be "fleeing from justice" (whether inside or outside the U.S.).  I suppose the question then is what this means.  As I say in my Federal Tax Crimes book, the “majority rule” for §  3290 is that “intent to avoid arrest or prosecution must be proved” for § 3290's fugitive definition to apply; the minority rule is that mere absence from the jurisdiction, regardless of intent, is sufficient (I suppose just the objective fact of being absent from prosecution of justice is sufficient).