CtC Newsletter example of refund - proof it works?

[LPC]

How often does it happen that somebody with earnings from a job legitimately has zero tax liability?

I'm not sure how you can have $10,000,000 of AGI without paying any income tax.

Active Real Estate investments can throw off some wicked depreciation, and can carry tax credits. Between that, and like kind exchanges, you can pay no taxes for years. You can have cash flow, but tax losses, and this is not unusual. It is a fine balance, and leverage plays a part, but there are those in the Real Estate industry that have gone years without paying tax, and don't hurt for money in the least, it really is quite amazing.

Depreciation would flow into AGI, as would tax losses and like-kind exchanges.

Similarly, you can have positive cash flow and no AGI, so that's a different issue.

"Tax credits" could produce positive AGI without tax liability, but what kind of credits are you talking about?

While I have never seen it, I suspect Trump has a very low if not zero tax rate, or has had many years like that.

There's no reason to believe that Trump has any net worth, or any net income.

As you say, it's entirely possible to have leverage and cash flow without any income. It's also possible to do real estate deals with other people's money and non-recourse financing, so that having a net worth isn't necessary.

We won't know for sure until he's dead, but it's quite possible that Donald Trump has been the Potemkin Village of real estate for most of his career.

[Imalawman]

It really sounds like Pete is in total denial. I'm inclined to believe that he really doesn't understand why people don't trust an ex-con. This just shows that there is no upper bounds on his narcissism. It won't let him even consider that he was wrong.

[Famspear]

.....I'm inclined to believe that he really doesn't understand why people don't trust an ex-con.....

Yes, but we're not talking about an ordinary ex-con. Oh no! Peter Eric Hendrickson is an ex-con with a background in video arcade management and apartment complex maintenance (but without any training, credentials, or experience in law, accounting or taxation) who spent time in federal prison for using his own tax scheme on his own tax returns! So, of course, it's perfectly logical that everyone should conclude that Pete is right about Federal income tax, and that the 99.9% of tax lawyers, CPAs, law professors, and federal judges who dare to disagree with him are just wrong -- or corrupt!

[Imalawman]

.....I'm inclined to believe that he really doesn't understand why people don't trust an ex-con.....

Yes, but we're not talking about an ordinary ex-con. Oh no! Peter Eric Hendrickson is an ex-con with a background in video arcade management and apartment complex maintenance (but without any training, credentials, or experience in law, accounting or taxation) who spent time in federal prison for using his own tax scheme on his own tax returns! So, of course, it's perfectly logical that everyone should conclude that Pete is right about Federal income tax, and that the 99.9% of tax lawyers, CPAs, law professors, and federal judges who dare to disagree with him are just wrong -- or corrupt!

Are you being sarcastic? Its hard to tell.

I'm going to nitpick your "99.9%". Is there really any CPA, tax lawyer, or law professor that would agree with him now? Hell, even Becraft wouldn't back him up on his bat-shit crazy ideas. I think this is one time where its safe to raise this up to 100%.

[Famspear]

....Is there really any CPA, tax lawyer, or law professor that would agree with him now? Hell, even Becraft wouldn't back him up on his bat-shit crazy ideas. I think this is one time where its safe to raise this up to 100%.

I don't know. There used to be a few of his followers who claimed to be lawyers. Then, there was Joseph Alan Fennell in Georgia, who was indeed a CPA. Fennell's case is documented at the Dan Evans site:

http://tpgurus.wikidot.com/peter-hendrickson

According to the web site for the Georgia Secretary of State, Mr. Fennell "surrendered" his CPA license some time ago -- apparently prior to December 31, 2009. I don't know any more details about that.

Of course, this highlights the point many of us have made over and over: tax protesters are people with mental problems. Obviously, lawyers and CPAs know better, or should know better -- so with those who get into the tax protester-tax denier racket, it's either dishonesty or some sort of mental problem (generally both).

[NYGman]

As you say, it's entirely possible to have leverage and cash flow without any income. It's also possible to do real estate deals with other people's money and non-recourse financing, so that having a net worth isn't necessary.

We won't know for sure until he's dead, but it's quite possible that Donald Trump has been the Potemkin Village of real estate for most of his career.

Behind on my forum reading due to the storm, so sorry for the gap in response [Reminds me, I do need to get back to DMVP's board but that is another story]. In a former life I used to work in the RE industry on the tax structuring and compliance side. We would deal with clients constructing low income housing who would receive tax credits for certain projects. Those are what I was talking about. My point on income should not have been an AGI point, but the fact that I had many clients who did very well, before Depreciation, and after had low or no income, and tax credits to offset what wasn't theirs. There were lots of "tricks" in RE to defer income and gain, and returns can show losses for tax. My favorite was a developer distributing out a unit in a high rise condo in NYC, at cost, worth far, far, far more...

Reminds me of a story, I was working a stint in Public Accounting, and had a client who was a public figure, married to a RE Developer type person. Public figure went on TV saying how everyone should pay their fair share of taxes, and that they pay theirs. This was about a week after we completed their return reflecting losses, and no tax, and this was not unlike prior year returns. Just thought the hypocrisy funny...

[Arthur Rubin]

Reminds me of a story, I was working a stint in Public Accounting, and had a client who was a public figure, married to a RE Developer type person. Public figure went on TV saying how everyone should pay their fair share of taxes, and that they pay theirs. This was about a week after we completed their return reflecting losses, and no tax, and this was not unlike prior year returns. Just thought the hypocrisy funny...

Doesn't that statement violate confindentiality?

[NYGman]

Reminds me of a story, I was working a stint in Public Accounting, and had a client who was a public figure, married to a RE Developer type person. Public figure went on TV saying how everyone should pay their fair share of taxes, and that they pay theirs. This was about a week after we completed their return reflecting losses, and no tax, and this was not unlike prior year returns. Just thought the hypocrisy funny...

Doesn't that statement violate confindentiality?

Over 18 years ago, and no identifying information provided All positions were perfectly legal at teh time, and after the fact (Not a tax shelter position) Plus they could be dead by now, for all I know... I could tell you about the guy many years later who bought 10,000 CAD with a tax basis in excess of 800,000, converted the CAD into USD and wanted to the capital loss, but I refused to touch that one with a 10 foot pole. He had a legal opinion and everything :S

[Burnaby49]

Reminds me of a story, I was working a stint in Public Accounting, and had a client who was a public figure, married to a RE Developer type person. Public figure went on TV saying how everyone should pay their fair share of taxes, and that they pay theirs. This was about a week after we completed their return reflecting losses, and no tax, and this was not unlike prior year returns. Just thought the hypocrisy funny...

Doesn't that statement violate confindentiality?

Over 18 years ago, and no identifying information provided All positions were perfectly legal at teh time, and after the fact (Not a tax shelter position) Plus they could be dead by now, for all I know... I could tell you about the guy many years later who bought 10,000 CAD with a tax basis in excess of 800,000, converted the CAD into USD and wanted to the capital loss, but I refused to touch that one with a 10 foot pole. He had a legal opinion and everything :S

As a Canadian who loves to read about tax scams involving us can you give me a very rough idea how that was supposed to work? How do $C have a tax basis?

As far as legal opinions are concerned the Candian Tax Department and Canadian courts consider them irrelevant. Just fluff for the scam's clients.

[NYGman]

As a Canadian who loves to read about tax scams involving us can you give me a very rough idea how that was supposed to work? How do $C have a tax basis?

As far as legal opinions are concerned the Candian Tax Department and Canadian courts consider them irrelevant. Just fluff for the scam's clients.

Not sure it really involved Canada, just the currency, it could have been any currency. It was some time ago, and I did refuse to sign any return with that position, but I did have to read the thick legal opinion from a legitimate Law firm, and then tell a Managing Partner that I didn't agree with it, and that the transaction was a scam. My haziness now may be good as I don't want to give too much away, but I seem to recall the CAD was held in a partnership, and over time, they had managed to increase the basis, but exactly how, I really don't remember. Therefore, when this person bought in, he had an interest in the partnership that held 10k CAD with a reported cost of 800k. The partnership triggered the loss by converting the CAD to USD< and distributing it out. The $790k loss was allocated mostly to this person, as I believe they owned 99% of the partnership, or something like that. Client wanted us to do the Partnership return, so the loss could be reflected on a K1 that he would use to offset other gains he had that year. To be honest, the whole thing was absurd in my mind, and I never got how legitimately 10k CAD could cost 800k, and even if it did, how you could buy that loss for pennies on the dollar, but the legal opinion went in to great detail on this, and how it was valid...

This was some years back laws have changed and this would not be possible today, not that it was possible back then either, as it did ignore certain tax concepts that I found problematic. I do remember writing up a memo about why this didn't work, giving it to the partner and stating I wasn't touching it. I even had a conversation with the clients accountant, who agreed with me, but I don't recall (or am not in a position to tell) what happened after I refused. I left that job soon after, but not because of that transaction, or anything illegal... Just always stuck with me, that there was someone out there selling these losses, with a reputable Law Firm writing opinions.

[Burnaby49]

I had a 35 year career in Canadian tax law and I frequently got involved in tax avoidance scams but from the tax department side. Schemes that purported to allow taxpayers to purchase worthless assets and write-off their original tax costs were common, generally based on convoluted readings of partnerships rules. However they all failed for one of two reasons;

1 - No actual partnership.
2 - GAAR

GAAR is the General Anti Avoidance Rule, an actual part of the Income Tax Act that says that when the spirit and intent of the Act has been abused by taxpayers getting unintended tax breaks as a result of "misuse" of the Act the Canada Revenue Agency ("CRA") can reassess them notwithstanding that the scheme meets the provisions of the law. This was brought in when the government finally decided that there was no way they could plug all the loopholes that resulted in abusive schemes. GAAR isn't an easy default, there has to be a high hurdle to overcome in its application and many GAAR based assessments are reversed by the Tax Court. However it does allow the CRA to stop the most offensive ones. Links to two decision on GAAR assessments from inflated tax costs given below. They both involved Canadians getting into partnerships with Americans who had losses they couldn't write-off and transfering these losses to the Canadians through partnerships.

Water's Edge shows how ludicrous these schemes could get. The Canadians essentially paid $372,000 join an American partnership which owned an old IBM mainframe. It had intially cost $3,700,000 but, at the time of the partnership purchase, was totally obsolescent and worth about $7,000 scrap value. Through adroit manipulation of partnerships and the explotation of "loopholes" in Canadian tax law the Canadians were able to to use the original cost of the computer for tax purposes and claimed a terminal loss on the computer of $4,480,000. The CRA tossed the claimed loss on the basis of partnership law and GAAR. The court agreed that while everything was entirely legal the taxpayers lost under GAAR.


http://decision.tcc-cci.gc.ca/en/1999/1 ... 97225.html

http://decisions.fca-caf.gc.ca/en/2002/ ... ca291.html

[Famspear]

Prevaricating Pete, the Fabulous Felon, the Bloviating Blowhard, the Haughty Hendrickson, has posted a question in a new thread at losthorizons. It's a survey question, and the question to his followers is:

Do you read the LostHorizons newsletters each week?

http://www.losthorizons.com/phpBB/viewt ... ed0#p28847

So far, all the respondents have stated "always" or "usually."

[webhick]

So far, all the respondents have stated "always" or "usually."

All three of them.

[Pottapaug1938]

Prevaricating Pete, the Fabulous Felon, the Bloviating Blowhard, the Haughty Hendrickson, has posted a question in a new thread at losthorizons. It's a survey question, and the question to his followers is:

Do you read the LostHorizons newsletters each week?

http://www.losthorizons.com/phpBB/viewt ... ed0#p28847

So far, all the respondents have stated "always" or "usually."

I can't answer, because there's no option for "I'd rather scrub my street, on my hands and knees, using my toothbrush, than wade through this bulldada."

[Famspear]

In that thread at losthorizons, user "holbrook" writes the following regarding Hendrickson's "newsletters":

I use to read them ALL.
Lately, I have been down on all this IRS BS!
I filed my corrected returns [sic; he means he filed tax returns using Hendrickson's CtC scam] for all the years since 1998.

I filed them in person and had them stamped as received, and since then ( 2007 ) they [the IRS] just ignore that and keep sending me notices ( that I now throw away ) and they have started taking 15% of my $700 SS benefits.

They don't give a hoot about my corrected returns. They just don't give a hoot!

I don't give a hoot any more about responding to their zombies who NEVER respond with ANY answers.

So, I have lost much interest in reading the newsletters.
Please don't be offended Pete because I know you are helping others to better understand all this stuff.

Hope you all have a wonderful holiday and again Pete.....welcome home!
You are a REAL hero!
May God bless you and your family.

Ah, what a stirring testimonial to the usefulness of Hendrickson's scam!

[fortinbras]

This line from that LostHorizons message ....

... they [the IRS] have started taking 15% of my $700 SS benefits.

... explains perhaps why this particular person is not being more seriously pursued by the IRS (such as being prosecuted); he is financially limited, as shown by receiving SocSec benefits, and the IRS presently has figured out how to get a little more than $100 from him monthly - but if he goes to prison then even the SocSec stops and the IRS gets nothing. So the IRS leaves him as he is and tries to content itself with garnishing his SocSec checks.

[Famspear]

User "TruthBearer" at losthorizons dot com responds to Pete Hendrickson:

I read your weekly news posts each week, and share your probable frustration that the "warriors" don't respond well to your constant urgings to do this or that. I'm somewhat guilty of that myself, although I have been successful (for five years now) in getting Auntie IRS off my back, and I make it a point to tell everyone I know about CtC. Most of them are sympathetic, but are scared to death to incur the wrath of IRS. I also wonder, constantly, why it is that Big Names in the media (who could be very influential) also refuse to read CtC or have anything to do with educating themselves on the actual workings of the federal excise tax on earnings. One huge hurdle for them, IMO, is that when they google Pete's name, as author of CtC, they read that he was found guilty of income tax evasion and so immediately brand him as a nut case. I know of several instances when that has happened with folks I've introduced to the book and subject.

Golly, gee willikers! Imagine that! Normal people of normal intelligence who conclude that Peter Eric Hendrickson is a "nut case." Where do people get ideas like that??



By the way, "TruthBearer", Hendrickson was not charged with or found guilty of tax evasion. He was charged with and found guilty of filing false federal income tax returns in which he used his Cracking the Code tax evasion scheme.

Sorry to have to split hairs like that. The tendency to split hairs is a major personality flaw of mine.

[wserra]

User "TruthBearer" at losthorizons dot com responds to Pete Hendrickson:

he was found guilty of income tax evasion and so immediately brand him as a nut case.

Before the meter gets to "Nut Case", it first passes "Simply Wrong".

[Gregg]

Before the meter gets to "Nut Case", it first passes "Simply Wrong".

When it did, it didn't miss a beat.

[LPC]

One huge hurdle for them, IMO, is that when they google Pete's name, as author of CtC, they read that he was found guilty of income tax evasion and so immediately brand him as a nut case. I know of several instances when that has happened with folks I've introduced to the book and subject.

That's not a "hurdle," that's a feature.

You could also call it "fulfilling a mission" for many of us.