Man Can't Get FBAR Penalties Overturned

2022-06-02 08:22:34

A naturalized citizen must shoulder tax charges for failing to disclose foreign bank accounts to the Internal Revenue Service since the government established that he knowingly tried to conceal his revenue overseas, the Eleventh Circuit stated on Friday.

As per the per curiam, a three-judge panel affirmed that the Florida federal court was right to have found Said Rum answerable for the maximum penalty for his inability to disclose Statements of Foreign Bank and Financial Accounts. Rum was unable to prove that the fine, which the IRS fixed at 50% of undeclared funds, was subjective and erratic as per the opinion.

"In conclusion, the proof was compelling that Rum attempted to conceal his offshore accounts from the U.S. government," the opinion said. "He made attempts to hide the accounts and not disclose his income to the authorities on several occasions."

Rum, a Jerusalem born has been a naturalized American citizen since 1988. He has held and controlled a variety of businesses, such as a convenience store and delicatessen. Rum created a Swiss UBS bank account in 1998 and deposited $1.1 million to hide the funds from judgment creditors, according to the opinion.

According to court filings, Rum neglected to declare the funds in the UBS account to the IRS, which was subsequently closed in 2008 after $1.4 million was moved to Arab Bank. Rum moved the $1.4 million to a U.S. account in 2009, and on his 2009 tax return, he declared around $40,000 of the $300,000 in investment income earned while the assets were kept in foreign institutions, according to the opinion.

According to the opinion, Rum's 2009 tax return prompted an IRS audit, which resulted in the agency assessing unpaid taxes and proposing a maximum deliberate FBAR penalty for the 2007 tax year for his inability to report the overseas bank accounts.

Rum contested the IRS' appraised taxes and fines in the U.S. Tax Court, which ascertained that he would be culpable not for civil fraud fines but for accuracy-related penalties for his minimization of revenue during the time he hid his overseas bank account.

As per court filings, the IRS sued Rum in the federal court in Florida to impose the FBAR penalty against him and gained summary judgment on its behalf, which Rum challenged.

Rum argued on appeal that the lower court used the wrong standard of willfulness in finding him responsible for the FBAR penalty and that the sentence was inappropriate and unjust.

Rum failed to demonstrate how the district court improperly construed willfulness to include "recklessness," according to the Eleventh Circuit, a judgment reached by numerous other appeals courts.
Rum's arguments regarding whether there were any substantial fact concerns throughout the district court proceedings were likewise found to be lacking by the IRS's evidence, according to the appeals court.

Rum's use of numbers rather than his name on his overseas bank accounts, as well as his request that his assets not be invested in U.S. securities while they were with the UBS, were strong indicators that he was attempting to conceal his income according to the Eleventh Circuit.

Requests for a response from the government's legal team and Rum were not immediately addressed.

The panel for the Eleventh Circuit included U.S. Circuit Judges Robin S. Rosenbaum, Robert J. Luck, and R. Lanier Anderson III.

Geoffrey Klimas and Francesca Ugolini of the U.S. Department of Justice's Tax Division represent the government. At the same time, Rum is advised by Venar R. Ayar of the Law Office of Venar Raad Ayar PLLC and Ashraf Salem of the Law Office of Venar Raad Ayar PLLC.

The case is U.S. v. Said Rum, case number 19-14464, in the U.S. Court of Appeals for the Eleventh Circuit.

Erwin Mattegon