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Dewey Residents Falsely Advertised “Corporation Sole” Tax Benefits

WASHINGTON – A federal court in Phoenix has permanently barred Dewey, Ariz., residents Elizabeth A. Gardner and her husband, Frederic A. Gardner, from promoting a tax fraud scheme involving a “corporation sole” program that they had sold to over 300 people and from which they may have reaped close to $350,000, the Justice Department announced today. Senior Judge Earl H. Carroll of the United States District Court for the District of Arizona issued the civil injunction order.

In issuing the civil injunction order, the court found that the Gardners falsely told customers they could use an entity called a “corporation sole” to avoid paying federal income taxes. A “corporation sole” is a type of corporation sometimes used by religious leaders to hold property for the benefit of a church. It does not provide federal tax benefits.

According to the court’s order, the Gardners falsely advertised that their “corporation sole” program had “complete immunity from disclosure to the government” and could reduce a person’s taxable income by 95%. The order also stated that the Gardners enjoyed tax-exempt status even though the “corporation sole” did not qualify as a tax exempt organization and offered property tax relief and asset protection when a taxpayer titled his/her home to the “corporation sole.”

In rejecting the Gardners’ tax theories, the court emphasized that the “Gardners’ statements that a person can assign his income to a corporation sole (through the use of an LLC and trust), even if it is established for a religious purpose, and not owe federal income on it are false and fraudulent.” The court noted that the Gardners’ fraudulent tax program caused harm to their customers who paid them significant sums to establish legal entities that are “worthless with regard to tax benefits,” to the United States since the taxpayers who followed the Gardners’ fraudulent advice did not pay their correct taxes, and to the public because the IRS has been forced to devote its limited resources to identifying and trying to recover the lost revenue.

“‘Corporation sole’ tax schemes, like the one the Gardners touted, are fraudulent, pure and simple,” said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. “For more than 70 years, courts have ruled time and again that tax schemes like these are bogus. Those who peddle this phony product and those who purchase it should know that they are potentially facing stiff civil penalties and jail time.”

The court’s order requires the Gardners to notify their customers of the injunction and to give the Justice Department a list of their customers’ names, addresses, phone numbers and Social Security numbers.

The Justice Department has obtained many permanent injunctions against a number of people who sell corporation sole scams. Since 2001, the Justice Department’s Tax Division has obtained more than 315 injunctions against tax-fraud promoters and unscrupulous tax preparers. Information about these cases is available on the Justice Department website, as is information about the Justice Department’s Tax Division.

Related Documents:

  United States v.
  Elizabeth A. Gardner, et al.

Order of Permanent Injunction

(PDF document)

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