Before diving into the issues actually resolved in the Vallone case (see Installment #1, here), I just want to point out that the "Four of the defendants—Vallone, Bartoli, Hopper, and Dunn—also were charged [and convicted] with willfully aiding and assisting, procuring, counseling, and advising the preparation and presentation of the false and fraudulent income tax returns filed by multiple Aegis clients." (Emphasis supplied)
As readers will recall, I have had several blog entries (see here) on the issue of whether taxpayer innocent with respect to a false or fraudulent return based on someone else's fraud can be subject to the unlimited civil statute of limitations in Section 6501(c)(1), here. At the IRS's request, the Tax Court in Allen v. Commissioner, 128 T.C. 37 (2007) held that the preparer's fraud would suffice. On its face Section 6501(c)(1) says nothing about whose fraud is required must be, but over the life of this provision (over 80 years, including earlier acts and codes), the notion that a fraudulent return invokes the unlimited statute of limitations even if the taxpayer committed no fraud had never surfaced until Allen.
As I noted in the blogs, if Allen were correctly decided, fraudulent tax shelter promoters' fraud would suffice. Hence, it would appear that all of the taxpayers involved in the Aegis shelters are at risk even if their statutes of limitation had long since expired. And forever is a very long time.
For further reading on the Allen issue, see Jeremiah Coder, The IRS's Misguided Fraud Whodunit, 137 Tax Notes 7 (Oct. 1, 2012).
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