SAN JOSE, California – Cheryl Savage was sentenced last week to 14 months in prison, and ordered to pay a $10,000 fine and $123,463 in restitution for tax evasion, United States Attorney Melinda Haag and Internal Revenue Service, Criminal Investigation, Special Agent in José M. Martinez announced.
Savage, age 57, of Monterey, California, pleaded guilty on September 12, 2012. According to court documents, Savage has been a realtor since 1981, becoming a broker in 1988 when she opened Steinbeck ERA Realty, a real estate brokerage in Salinas, California. On her business website, Savage describes herself as knowledgeable in 1031 Tax Deferred Exchanges. A 1031 Tax Deferred Exchange occurs when a taxpayer sells rental property and reinvests the sales proceeds in replacement rental property. In this way, a taxpayer can defer the recognition of capital gains tax until the replacement rental property is sold.
In 2004 Savage sold two rental properties, realizing $777,014 taxable gain. Savage used those sales proceeds to purchase her primary residence at Via Del Milagro in Monterey, California. In October 2005, she filed her 2004 federal income tax return falsely reporting that the proceeds from the sale of her rental properties were used to purchase a replacement rental property. Savage also falsely reported that she had received rental income from Via Del Milagro. The rental payments Savage reported on Schedule E of her 2004 federal income tax return were actually from a tenant who leased another property Savage owned.
Savage was charged by a federal grand jury on October 4, 2011 with three counts of tax evasion. She pleaded guilty to one count.
The case is being prosecuted Assistant U.S. Attorney Cynthia Stier. The prosecution is the result of an investigation by the Internal Revenue Service, Criminal Investigation.