FOR IMMEDIATE RELEASE                                         TAX
TUESDAY, JUNE 24, 1997                             (202) 616-2765
                                               TDD (202) 514-1888

   U.S. SUES TO HALT ABUSIVE TAX SHELTER PACKAGE IN SACRAMENTO

     WASHINGTON, D.C. -- The Justice Department filed suit
yesterday against three individuals, a trust and a corporation
located in Sacramento, California, alleging they sold and
distributed abusive tax shelter advice to hundreds of people.

     The civil suit, filed yesterday in U.S. District Court in
Sacramento, is part of an ongoing effort by the Justice
Department to halt the sale and distribution of illegal tax
preparation advice designed to interfere with the IRS' proper
administration of the tax laws.  The suit estimates that the
potential annual loss of revenue to the Federal treasury as a
result of the defendants' continued conduct exceeds $4 million.

     The defendants charged taxpayers from $750 to $5000 for each
package, sold primarily through a nationwide network of financial
planners.  They also conducted monthly seminars for the financial
planners to advise them how to sell the trust documents.  Some
taxpayers also attended the seminars.  None of the planners have
been charged with any wrongdoing.

     "Taxpayers approached by promoters of these schemes should
be extremely careful and not be induced into disregarding their
tax obligations," said Loretta Argrett, Assistant Attorney
General for the Justice Department's Tax Division.  "Taxpayers
who use these schemes to evade federal taxes may ultimately be
subject to criminal prosecution and responsible for paying not
only the taxes owed, but also any interest and applicable
penalties."

     The complaint alleges that Robert L. Henkell, of Roseville,
Charles Scott Grace, of Salinas, and William L. Sefton, of
Danville, as well as Estate Preservation Services, a trust, and
Estate Preservation Service, Inc., a California corporation,
marketed a series of purportedly non-grantor trust documents. 
Non-grantor trusts have different tax consequences than grantor
trusts.  
   
     The lawsuit seeks a court order requiring the defendants to
stop marketing the purported non-grantor trust documents and to
stop making false statements concerning taxes.  It alleges that
by continuing to sell and distribute the abusive tax shelter, the
defendants are interfering with the ability of the IRS to enforce
the tax laws.

     As part of their sales pitch, the defendants claimed:

     *    that business equipment can be transferred at no cost
          to a trust giving the trust a higher basis in the
          equipment than available to the taxpayer for the
          purpose of improperly avoiding taxes;

     *    that equipment which has been fully depreciated by a
          taxpayer can be transferred by the taxpayer at no cost
          to a trust which can then redepreciate the same
          equipment for the purpose of improperly avoiding taxes;

     *    that equipment transferred to a trust by a business can
          be leased back to the business at inflated rates
          thereby transferring income from the business to the
          trust for purpose of improperly avoiding taxes;

     *    that supplies and services can be purchased for a
          business through a trust at a significant mark-up to
          the business by the trust thereby transferring income
          from the business to the trust for purposes of
          improperly avoiding taxes;

     *    that income paid to a trust by a business at inflated
          rates can be "funneled" back to the personal account of
          the taxpayer without any tax consequences;

     *    that personal residences of taxpayers can be
          transferred to a trust and then depreciated as a
          business asset for the purpose of improperly avoiding
          taxes;

     *    that maintenance and upkeep on a personal residence can
          be fully deducted by a trust for the purpose of
          improperly avoiding taxes;

     *    that other personal expenses can be paid through a
          trust in order to improperly obtain tax benefits not
          available to individuals; and

     *    that individual taxpayers can set up their own
          charities to improperly amass assets tax free and to
          hide money from the Internal Revenue Service.

None of these assertions are correct under the law.    
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