Los Angeles, California – LAWFUEL – Tax Law News, Law Jobs – In United States District Court this afternoon, a North Hollywood man pleaded guilty to tax fraud and to aiding and abetting others in the preparation of false income tax returns that claimed charitable contribution deductions to which the return filers were not entitled.
Jerome Berman, appearing before United States District Judge Florence-Marie Cooper in Los Angeles, entered his guilty plea to one count of subscribing to a false income tax return and to one count of aiding and abetting in the preparation of a false tax return. Berman’s scheme fraudulently claimed increased income tax deductions for charitable contributions on his own individual tax returns as well as aiding others in claiming fraudulently increased charitable contribution deductions on their own tax returns for having made art donations to the California Museum of Ancient Art.
The plea agreement, filed in January, 2007, sets forth that Berman was a 50% partner in the Oxford Collection Partnership and was the Executive Director of the California Museum of Ancient Art. In an effort to encourage the purchase of art by dealers and individuals, Berman would advocate the tax benefits of purchasing items and donating said items to the California Museum of Ancient Art. To accomplish this, Berman orchestrated inflated charitable contribution deductions for himself and others by backdating the actual purchase date of art works that were charitable contributions to his museum. By backdating the purchase date to a date that was more than 12 months prior to the donation of the artwork, Berman and his customer/contributors could claim a charitable deduction using the appraised value of the artwork. If a donation of art that is held for less than 12 months is made, the contributor is only allowed to claim the purchase price as a charitable contribution deduction. By backdating, Berman and his customers could claim the appraised value of the artwork as a deduction, which in most instances was 300% higher than the actual purchase price.
Berman admitted that, from 1997 through 2001, he aided and assisted in the preparation of at least eleven false income tax returns for others in this scheme, claiming false charitable contribution deductions on their tax returns of at least $565,000. These claims resulted in a tax loss of at least $156,871. Additionally, Berman’s claiming of fraudulent charitable contribution deductions on his own income tax returns resulted in a further tax loss of $82,664. As part of his plea, Berman agreed to make full restitution for the losses resulting from his scheme. The losses attributed solely to the filing of Berman’s own income tax returns, including penalties and interest, has totals $263,178.90.
When sentenced for his tax crimes, Berman faces a statutory maximum of six (6) years imprisonment followed by one (1) year of supervised release and fines of approximately $500,000. Judge Cooper ordered Berman to appear for sentencing on June 18, 2007.
The investigation and prosecution of Berman was handled by IRS Criminal Investigation and the United States Attorney’s Office in Los Angeles.
For more information on the requirements that must be met in order to deduct charitable contributions, refer to Publication 526, Charitable Contributions; Publication 561, Determining the Value of Donated Property; Form 8283, Noncash Charitable Contributions, and its instructions; and Tax Topic 506, Contributions. These items can be found at the IRS website located at www.irs.gov.