Businessman Accused of IRS Expatriation Fraud (U.S v. Tinkov)

Businessman Accused of IRS Expatriation Fraud (U.S v. Tinkov)

Russian Businessman Accused of Expatriation Tax Fraud 

Russian Businessman Accused of Expatriation Tax Fraud: Each year, we help several clients successfully expatriate from the U.S.. Most of our clients are Covered Expatriates, and as a result they may be subject to exit tax.

An exit tax is essentially a U.S. tax on the “fake gain,” derived from the increased value of certain assets in accordance with the mark-to-market regime.

Moreover, a U.S. person may also be subject to tax on certain deemed distributions for income items such as ineligible deferred compensation (foreign pension), non-grantor trusts, and more.

Recently, Mr. Tinkov was caught trying to avoid the U.S. exit tax, and the DOJ is going after him.

Let’s explore.

U.S. v. Oleg Tinkov

Mr. Tinkov was a very successful Businessman. He was a naturalized U.S. citizen who was originally from Russia. He was the owner of an online bank, that operated through a maze of holding companies. The maze involved Russian entities, multiple BVIs (British Virgin Islands) and more.

In 2013, the institution held and IPO, and Mr. Tinkov’s shares were estimated at $1 Billion. Since Mr. Tinkov was a U.S. Citizen, he was subject to the Covered Expatriate analysis. And, because Mr. Tinkov was worth a $1 Billion, it was safe to say he would presumably have had a pretty heavy exit tax.

When it came time to file his final tax return, he claimed a few hundred thousand in earnings, and attempted to circumvent the exit tax.

The U.S. caught on, and now he is being charged with tax fraud.

Department of Justice Press Release

As provided by the Department of Justice:

“Oleg Tinkov, the founder of a Russian bank, was arrested in London in connection with an indictment charging him with filing false tax returns, announced U.S. Attorney David L. Anderson, Principle Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, and Internal Revenue Service (IRS) Criminal Investigation, Special Agent in Charge Kareem Carter.  The indictment issued Sept. 26, 2019, by a federal grand jury, was unsealed following yesterday’s arrest. 

According to the indictment, Tinkov was the chairman and beneficial majority shareholder of Tinkoff Credit Systems (TCS), a branchless online bank that provided its customers with financial and bank services.  On October 25, 2013, TCS held its initial public offering (“IPO”) on the London Stock Exchange.  TCS’s per share price opened at $17.50.  The indictment states s that of TCS’s IPO, Tinkov owned, through multiple British Virgin Islands entities, more than 92 million TCS shares, making him the beneficial owner of more than $1 billion worth of TCS shares. 

The indictment alleges that three days later, on October 28, 2013, Tinkov, a Russian national, renounced his U.S. citizenship.  Tinkov’s decision to renounce his citizenship was a taxable event requiring him to report to the IRS the constructive sale of his worldwide assets, report the gain on the constructive sale of those assets to the IRS, and pay tax on such gain to the IRS. 

According to the indictment, despite knowing he beneficially owned more than $1 billion of TCS shares at the time of his expatriation, Tinkov filed a 2013 U.S. Individual Income Tax Return with the IRS that reported total income of less than $206,000. 

In addition, Tinkov filed a 2013 Initial and Annual Expatriation Statement reporting his net worth was $300,000.  The indictment charges Tinkov with two counts of tax fraud, in violation of 26 U.S.C. § 7206(1). 

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendant faces a maximum sentence of three years in prison and a fine of $250,000 for each count.  He also faces a period of supervised release, restitution, and monetary penalties. 

However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  The United States is seeking Tinkov’s extradition from the United Kingdom.

Assistant U.S. Attorneys Michelle J. Kane and Katherine Lloyd-Lovett and Trial Attorney Christopher Strauss of the U.S. Department of Justice Tax Division are prosecuting the case with the assistance of Katie Turner and Rebecca Shelton.  The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation. 

The Criminal Division’s Office of International Affairs of the Justice Department is assisting with the extradition.”

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.

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Recent Golding & Golding Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.

How to Hire Experienced Offshore Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • Board Certified Tax Law Specialist credential
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  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience
  • Dually Licensed as an EA (Enrolled Agent) or CPA

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