Corporation Sole Scam

Quatloos! > Investment Fraud > Financial Planning > Asset Protection Scams > Corporation Sole

The corporation sole is an entity recognized in some states and is an entity designed basically to allow religious groups to operate without the strict formalities of the typical business corporation. However, scam artists are now touting it as a vehicle that provides asset protection and tax freedom to ordinary citizens. In the words of Colonel Potter, "Horsehockey".

To debunk some of the scam babble contained in the e-mail you may receive from corporation sole scammers:

(1) Corporations sole provide NO (i.e., zero, zip, nada) asset protection over and above what a typical corporation provides, which isn't much.

(2) Corporations sole provide NO asset protection to the owners of the corporation sole other than possibility containing the liability of the church -- and mind you it is difficult to see how a church could have liability -- within the entity.

(3) Corporations provide NO asset protection to the non-church of the owners, i.e., tort liability, debt liability, whatever.

(4) The Crown of England is NOT a corporation sole. I don't know who came up with this lie, but it is a whopper.

(5) The Governor of Tennessee is also NOT a corporation sole. Another whopper.

(6) The corporation sole does NOT save taxes. The IRS does NOT recognize a corporation sole differently from any other entity. To obtain non-profit status, it MUST qualify under 501(c)(3) like every similar entity.

(7) The corporation sole does NOT help its owners save taxes. Claims to the contrary are totally bogus.

(8) A corporation sole MUST report the movement of funds just like any other taxpayer; the failure to report foreign accounts or transfers will in most cases subject those affiliated with the corporation sole to felony criminal penalties.

(9) Any money that the corporation sole pays out to you personally must be reported to the IRS by you personally, and taxes paid on those money. The claim below basically solicits tax evasion, and is wrong.

The below e-mail seems to be the typical claims of the scam artists who sell these things. You'll find that none of the promoters of the corporation sole have any legal or accounting experience or education, or otherwise be qualified to know even 1% of what they are talking about. Usually, they are just repeating the fraudulent statements of some other seller of this scam that they have met.

_______________________

Scam Solicitation

Dear Friends,

Very little written materials are in print and available about Corporation Soles and yet they are one of the oldest and safest creations in the world for asset protection, individual privacy, and legal tax avoidance.

Americans are discovering they are not in control of their own assets and lives. Over time, both our property and us have become property of the world bankers and leaders that are pushing us into the one- world government and socialism. I'd like to introduce you to the best product money can buy today for asset protection and freedom from government control. Corporation Soles are by far the best protection for you and your properties against taxation, or seizures. The Crown of England is a Corporation Sole. Can you imagine the Queen/King of England being subject to any rules or regulations over their personal business or property? The Governor of Tennessee is considered a Corporation Sole.

Corporation Soles are superior to any other offshore and or on-shore structures in every way imaginable when it comes to privacy and asset protection. The IRS is on a rampage to destroy onshore and offshore Trusts, IBCs, UBOs, etc., no matter where they are. If you've set up a trust anywhere in the world they want to know what you're hiding, you are automatically suspect of tax evasion. I have been down this path, and I recommend dispensing with these entities in lieu of one or more Corporation Soles over which the IRS has no jurisdiction. The rich and powerful say, "Own nothing and manage everything." This is exactly what you do with a Corporation Sole. They've stood the tests of time for centuries. If you expect to earn funds off-shore – bring them into the US to a corporation sole bank account and there will be no reporting or tax liability. Corporation soles pay for themselves over and over in a very short time.

Here are just some of the benefits of a Corporation Sole:

As titular head, YOU are in complete control of everything at all times, assets, operations, banking, etc. [and if you are in total control then the doctrine of "Alter Ego" takes over and makes you responsible for all debts too]
Corporation Soles have NO tax liability [utterly bogus as although a corporation sole can qualify for 501(c)(3) status it can still be subject to UBTI and a host of other taxes]
No tax liens, or levies can occur against property owned by a CS [this claim comes out of thin air and is not supported by law]
Bank transfers of up to $10 million can be made without bank reporting to the IRS [utterly bogus assertion as the CS must report and pay taxes on financial transactions like any other corporation]
They are perpetual, meaning they have no ending date and can last for generations [which is nonsensical since they only benefit true churches and cannot by law be used by familes]
They have only "successors" no beneficiaries [which doesn't eliminate tax liability to the extent these are used for personal purposes or to transfer wealth to children, etc.]
You can use CS funds for your livelihood, as priests and nuns of the Catholic church do [and pay income tax on it]
No reporting or specific recording is required by any taxing agency [totally wrong, unless felony tax evasion is your name]
There are no large "annual" fees to pay ever [because you're not getting much]
Changes to a CS can be done with only "minutes" to your own private document [not in most states which require filing like any other corporation although slightly cheaper]
The IRS furnishes a special EIN# that they do not track for ease of opening bank accounts. [totally false as a CS reports taxes like any other corporation or non-profit]
There is no government interference as long as no "laws" are broken [totally bogus as CS are formed under state law and can be regulated by the state like any other corporation]
A CS can own multiple businesses, and bank accounts [but if it conducts any other business than being a church, it will be hit with what is known as UBTI which will probably be passed to the owners of the CS, along with interest and penalties]
Most business owners can direct business profits to a CS without taxation. Instead of taking a `salary" – just spend the money in the CS bank accounts. [and go to jail for tax evasion . . .]

FOR IMMEDIATE RELEASE
MONDAY, MARCH 29, 2004
WWW.USDOJ.GOV

TAX
(202) 514-2007
TDD (202) 514-1888

JUSTICE DEPARTMENT SUES TO STOP NATIONWIDE
TAX SHELTER INVOLVING FALSE CHURCH STATUS

Suits Filed In California, Colorado, Oklahoma, Missouri And North Carolina

WASHINGTON, D.C. - The Department of Justice today filed suits in federal courts in California, Colorado, Oklahoma, Missouri, and North Carolina to stop a nationwide abusive tax scheme in which customers are advised to create, and claim church status for, a company known as a corporation sole.

“As con artists continue to press their tax scam promotions on the public, the Department of Justice continues to work with the IRS to shut them down.” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division.

Named in the suits were:
lead promoter Joseph O. Saladino of Palmdale, California;
his organization, Freedom & Privacy Committee;
Jason A. Whitney of Tarzana, California;
Thomas and Charlene Chapin of Denver, Colorado;
Richard M. Blackstock of Broken Arrow, Oklahoma;
Janis E. Greehey of Branson, Missouri;
Nancy E. Lloyd of Greensboro, North Carolina; and
Frank D. Perkinson of Garner, North Carolina.

According to papers filed in the cases, it is alleged that Saladino and the other defendants advise and assist customers to establish and claim church status for a corporation sole, to which the customers transfer assets and income that they continue to control. The government alleges the corporations sole are used merely to fund a person’s lifestyle, and not for church purposes. The complaint alleges that Saladino and his sales organization falsely state that customers who use corporations sole do not need to file tax returns or pay taxes.

It is further alleged that in another part of the scheme, the defendants help their customers file false returns seeking refunds from the government for past taxes paid, based on the bogus argument that compensation for personal labor is nontaxable. Defendants call this the “claim of right” doctrine.

The Justice Department has asked the courts to order Saladino and the other defendants--and anyone working with them--to stop promoting these schemes and to provide the government with their customer lists. More than 700 customers, located in nearly every state and several foreign countries, are alleged to be in the program.

According to court papers filed by the Justice Department, Saladino and his cronies market their scheme on the Internet, in conference calls and at seminars. In its court papers, the Justice Department alleges that customers are charged from $200 to $2,295 to participate in the schemes.

Corporation sole and claim of right promotions are named in the IRS’s annual consumer alert of the “Dirty Dozen” as tax scams taxpayers are urged to avoid. A complete list of the “Dirty Dozen” can be found http://www.irs.gov/newsroom/ article/0,,id=120803,00.html.

IRS Warns of "Corporation Sole" Tax Scam

IR-2004-42, March 29, 2004

WASHINGTON - The Internal Revenue Service today issued a consumer alert advising taxpayers to be wary of promoters offering a tax evasion scheme that misuses "Corporation Sole" laws. Promoters of the scheme misrepresent state and federal laws intended only for bona-fide churches, religious institutions and church leaders.

"This scheme shamelessly tries to take advantage of special tax benefits available to legitimate religious groups and church leaders," said IRS Commissioner Mark W. Everson. "Unscrupulous tax promoters always look for ways to game the system and prey on unsuspecting victims. Taxpayers should be on the look-out for these and other scams."

Scheme promoters typically exploit legitimate laws to establish sham one-person, nonprofit religious corporations. Participants in the scam apply for incorporation under the pretext of being a "bishop" or "overseer" of the phony religious organization or society. The idea promoted is that the arrangement entitles the individual to exemption from federal income taxes as an organization described in Section 501(c)(3) laws.

The scheme is currently being marketed through seminars with fees of up to $1,000 or more per person. Would-be participants purportedly are told that Corporation Sole laws provide a "legal" way to escape paying federal income taxes, child support and other personal debts by hiding assets in a tax exempt entity.

While fraudulent Corporation Sole filings have happened sporadically for many years, the IRS has recently seen signs the scam could be starting to spread with multiple cases seen recently in states such as Utah and Washington. The IRS is concerned about this increase and is taking steps to pursue Corporation Sole promoters and participants.

Used as intended, Corporation Sole statutes enable religious leaders - typically bishops or parsons - to be incorporated for the purpose of insuring the continuation of ownership of property dedicated to the benefit of a legitimate religious organization. Generally, creditors of a Corporation Sole may not look to the assets of the individual holding the office nor may the creditors of the individual look to the assets held by the Corporation Sole. Currently, 16 states permit Corporation Sole incorporations. The IRS suggests that individuals considering becoming involved in any kind of tax avoidance arrangement obtain expert advice from a competent tax advisor not involved in selling the arrangement. Do not rely on legal opinions obtained or provided by the arrangement's promoter. Start by asking the following questions:

Is the arrangement designed to hide income or assets?
Is the arrangement designed to evade income taxes?

Answering "yes," or even "maybe," to either of these questions should raise red flags for taxpayers.

Additional information on Corporate Sole and the rest of the "Dirty Dozen" tax scams and schemes is available on IRS.gov.

Tax guidelines for churches and religious institutions can be found in Publication 1828, "Tax Guide for Churches and Religious Organizations".

Taxpayers with specific questions on a tax scheme or who wish to report a possible scheme can call (866) 775-7474 or send an e-mail to irs.tax.shelter.hotline@irs.gov.

Links on IRS.gov:

IRS Updates the 'Dirty Dozen' for 2004: Agency Warns of New Scams http://www.irs.gov/newsroom/article/0,,id=120803,00.html
Publication 1828, Tax Guide for Churches and Religious Organizations,
http://www.irs.gov/pub/irs-pdf/p1828.pdf

Attached: Statement from Utah and Washington Officials

Statement from State Officials

Mike Ricchio
Director, Corporations Division
Secretary of State's Office
State of Washington

"During the last few years, corporation sole filings have increased dramatically. Unfortunately, many appear to be submitted by the same, small group of people. They're filed on behalf of as many as 20 others at a time, over and over again. These filers are very reluctant to provide any address or identifying information to our staff. When we contact individual filers, we find they often operate under the mistaken impression that simply by filing a corporation sole, they are exempt from taxation and other kinds of debt collection. It's a shame people spend hard earned money on these filings in the belief they will become tax exempt even though they're not legitimate churches."

Kathy Berg
Director, Division of Corporations and Commercial Code
State of Utah

"Scheme promoters are telling people that by filing a corporation sole they are creating a church or a religious organization. This information is false. A religious organization must already exist before the authority for the organization files the articles of incorporation for the corporation sole. Any legitimate religious organization filing a corporation sole would have no fear of IRS scrutiny or any regulatory filing associated with the corporation sole.

During the last three years, the Utah Division of Corporations/UCC has seen an unprecedented growth in corporation sole filings. It appears that many of the filings are mass-produced, as there are only a few variations in the document content and verbiage. These recent filings are an abuse of the legislative intent of the Corporation Sole Act.