UBS Expected to Cooperate with IRS's John Doe Summons

Jacob Stein Esq.
July 7, 2008 — 1,098 views  
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Following the indictment of several UBS AG (Switzerland) employees, the Justice Department requested permission from federal court to have the Internal Revenue Service issue John Doe summons to UBS AG (the Swiss parent of UBS).  The John Doe summons will instruct the Swiss bank to provide to the IRS information on all U.S. taxpayer who may have bank accounts with the bank in Switzerland.

The Justice Department has alleged that UBS has helped hundreds of American taxpayers evade payment of U.S. taxes by setting up sham foreign entities as the beneficial owners of Swiss accounts.  If UBS chooses to comply with the summons (they don’t have to, as they are not subject to the jurisdiction of U.S. courts, but they have indicated that they will), the hundreds of American taxpayers with accounts at UBS will get a large bulls-eye painted on them by the IRS.

Failure to disclose a foreign bank account and failure to pay taxes on income generated in such an account are subject to not only civil penalties, but also criminal penalties, which may mean jail time.

We have always advised our clients of two things: (i) disclose to the extent you are legally required to disclose, and (ii) do not bank with foreign banks that have business operations in the U.S.  See our recommendations regarding tax reporting of foreign bank accounts on www.maximumassetprotection.com.

Many Swiss private banks have no business activities in the U.S. and would simply ignore the summons from the IRS.  A bank like UBS, with significant U.S. operations, is in a different position and that is why they will cooperate.  Although the U.S. courts have no jurisdiction over UBS AG, they do have jurisdiction over the U.S. subsidiary, giving the courts and the IRS tremendous leverage over UBS.

In the meantime, if you have an account with UBS AG in Switzerland that you never disclosed, close it immediately and hire a good lawyer.

Jacob Stein Esq.

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Mr. Stein is a partner with the law firm Boldra, Klueger and Stein, LLP, in Los Angeles, California. The firm's practice is limited to asset protection, domestic and international tax planning, and structuring complex business transactions. The firm's goal is to provide the highest quality legal work that is usually associated with only the biggest law firms, in a boutique firm setting. Jacob received his law degree from the University of Southern California, and his Master's of Law in Taxation from Georgetown University. Mr. Stein has been accredited by the State Bar of California as a Certified Tax Law Specialist and is AV-rated (highest possible rating) by Martindale-Hubbell.