The government's allegations of recklessness and willful blindness in the case are grounded in genuinely disputed material facts, the court ruled Sunday. The estate of Sandra de Forrest presented evidence creating a question of fact as to her willfulness in failing to file reports of foreign bank and financial accounts, the court said.
De Forrest's husband, Henri de Forrest, held bank accounts outside the U.S., and he gave her power of attorney over a Swiss account in 1994, according to the order. Henri de Forrest also signed a 2001 general power of attorney form for the account, giving her authority. Sandra de Forrest opened her own Swiss account in 2001.
After Henri de Forrest died in 2006, Sandra de Forrest traveled to Switzerland and opened eight additional accounts, the order said. According to Sandra de Forrest, their purpose was to repatriate the funds back to the U.S., and she didn't know she had to file FBARs, the court said. She didn't tell her tax preparer of the accounts until 2006, when she falsely represented that she had recently discovered them, the court said.
The tax preparer testified that he immediately told de Forrest to file the reports. He also sent her FBAR forms for the 2003, 2004 and 2005 tax years to sign in 2009. De Forrest said she never received them. The IRS assessed $3 million in taxes and penalties against her in 2016.
The government then moved for partial summary judgment that de Forrest willfully failed to file the reports. It argued that she waited to tell her attorney and her tax preparer about the Swiss accounts until 2006, then lied by claiming she had recently discovered them, the court said.
In addition, de Forrest did not sign or submit FBARs for the 2003, 2004 and 2005 tax years that her tax preparer sent in 2009, the government said. According to the government, she had constructive knowledge of the contents of her signed tax returns, which explicitly asked about foreign accounts, the court said.
Finding that genuine disputes of material facts exist, the court said de Forrest denied that her tax preparer advised her in 2006 to file FBARs. Her preparer waited until 2009 to send the FBAR forms instead of sending them in 2006, and the letter he sent stated that the IRS had "recently indicated" that reports had to be filed, suggesting he himself had just discovered the FBAR requirement, the order noted.
The tax preparer also submitted tax returns in 2007 indicating that de Forrest did not have foreign accounts, the court said. This was after he supposedly informed her in 2006 of the duty to file, which is inconsistent with his testimony, it said. He also was aware of the eight accounts she opened, the court said.
Sandra de Forrest died in August 2019.
Legal representatives of the estate and for the government declined to comment.
The estate is represented by Shannon Crane Fiedler, Brian C. McManus and Miriam Louise Fisher of Latham & Watkins LLP, by Ryan Loosvelt of Messner Reeves LLP and by Amanda E. Litt of the Litt Law Firm LLC.
The U.S. is represented by Paul T. Butler and Rickey Watson of the U.S. Department of Justice, Tax Division.
The case is U.S. v. Estate of Sandra de Forrest, case number 2:17-cv-03048, in the U.S. District Court for the District of Nevada.
--Editing by Tim Ruel.
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