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Justice Department Sues Southland Tax Preparers

Two men are targeted as part of an ongoing IRS crackdown on promoters of dubious tax shelters.

October 01, 2003|Kathy M. Kristof | Times Staff Writer

The U.S. Justice Department sued two Southland tax preparers in federal court in Los Angeles on Tuesday as part of the government's ongoing effort to curb allegedly illegal tax schemes.

Arne R. Ristol of Riverside and James Mattatal of Harbor City were sued in separate actions that seek to stop them from preparing tax returns and promoting or selling trusts.

Neither Ristol nor Mattatal could be reached for comment Tuesday.

For the last four years, Mattatal has promoted a package of trusts that he tells his clients will eliminate their U.S. tax liability, according to the suit. He charges $5,000 to put a client's assets in separate domestic and foreign trusts in tax-haven countries, which are used to shelter the client's income from U.S. taxes.

However, the Internal Revenue Service maintains that the trusts are a sham. The agency has audited 18 of Mattatal's clients, assessing $1 million in tax and penalties. Some 140 returns that Mattatal prepared are under examination, the suit said.

Ristol, who owns and operates a tax-planning company called the Kismet Trust, sells so-called "unincorporated business trust organizations," which also purport to eliminate federal income tax by passing the client's money through a series of trusts, according to the complaint. Ristol has prepared about 150 returns that claim deductions for personal expenses, which cannot be deducted, the suit said.

The suits are part of a continuing national effort to crack down on promoters of illegal tax shelters. The nearly 3-year-old effort has resulted in hundreds of audits and thousands of settlements with individuals who used offshore accounts to avoid U.S. taxes.

In the last year, the IRS has sued a long list of shelter promoters, including accountants and attorneys. In each of the suits, the agency has asked for information about the promoter's clients, which IRS officials plan to use to conduct targeted audits.

"The Justice Department is taking all available steps to stop the promotion of tax evasion scams and the preparation of fraudulent federal tax returns," Eileen J. O'Connor, assistant attorney general for the Justice Department's tax division, said in a prepared statement. "People who try to avoid their tax obligations by using sham trusts face stiff penalties and possible criminal prosecution."

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