Who is Martin Shkreli? If you google “most hated man in America”, he is the top hit -in fact, the entire first page of results is devoted to him. So why the animosity? Most of it stems from his controversial decision as former CEO of Turing Pharmaceuticals to increase the price of a medication produced by the company by 5,000 percent. His actions have drawn the ire of many already, but now you can add the IRS to that list as well.
The Internal Revenue Service has filed a tax lien for $4,628,928.55 against Martin Shkreli, the former CEO of Turing Pharmaceuticals. The tax lien against Shkreli comes from unpaid 2014 taxes of $4,625,496.70 and unpaid 2013 taxes of $3,431.85, according to Gawker.com which broke the news first.
Shkreli became infamous last year when he and his company Turing Pharmaceuticals increased the price of Daraprim, a lifesaving HIV medication produced by the company by 5,000 percent, from $13.50 to $750 for each pill. A decision he said he regretted, not because of what he did, but because he didn’t raise the price higher. Democratic presidential candidate Hillary Clinton denounced him: “Price gouging like this in the specialty drug market is outrageous.” Republican opponent Donald Trump also attacked Shkreli. “He looks like a spoiled brat to me,” Trump said.
Heat coming from the IRS may be the least of Shkreli’s worries at the moment though: In an unrelated securities fraud case, Shkreli is accused of using money from a pharmaceutical company that he founded, Retrophin, to pay off investors in his hedge fund. Retrophin filed suit against him last August for $65 million. His other drug company, Turing, replaced him as CEO last December following his arrest.
This may be one of the rare occasions where most individuals will be rooting for the IRS.
Talley & Company
Advice. Solutions. Results.

In a landmark estate tax settlement the IRS netted $388 million in a record settlement with the estate of Bill Davidson, a noted philanthropist and owner of the Detroit Pistons, the WNBA’s Detroit Shock and the NHL’s Tampa Bay Lightning. The IRS claimed an astounding $2 billion deficiency of estate/gift/generation-skipping taxes with the former Pistons owner’s estate. To put it perspective, the Treasury took in a total of $12.7 billion in estate tax revenue in 2013. Where did Davidson go wrong?

Here’s the quick breakdown in dollars: $187 million in gift taxes, $152 million in estate taxes, $49 million in generation-skipping taxes, and a $133,000 gift tax penalty.

The IRS took note of two main issues that led to the deficiencies:

The estate undervalued corporate stock. The IRS claimed the estate reduced the value of privately held Guardian stock held in trust for children and grandchildren. Estates with hard-to-value assets such as privately-held stock, real estate or art need to pay close attention to the valuations for gift and estate tax purposes.

The estate also improperly valued self-cancelling installment notes (SCIN’s). Although they are a well-recognized means of tax mitigation, the IRS questioned the computations Davidson employed and claimed Davidson was making taxable gifts he should have reported. The IRS takes a tough stance on how you value the notes and what you need to do to establish that it’s a fair exchange of assets for the notes.

You don’t have to a part of the “Billionaires Club” to face estate planning challenges. Any individual or family with a business, real estate holdings, household property, liquid savings, or stock investments will want to establish a thorough estate plan before unforeseen circumstances intervene. The only way to make sure more of your money is transferred to the people and causes you care about (over the IRS) is to plan for it with your advisors. Talley & Company is here to help.

January 9, 2015
While most of us were settling back into the office this week, Teresa Giudice from the infamous reality TV show “The Real Housewives of New Jersey” was settling in to her new home at the Federal Correctional Institution in Danbury. She’ll be trading the opulent, Italian-style divans inside her NJ mansion for a shabby, not-so-chic cot in a jail cell for the next 15 months (if she actually serves her full sentence).
According to the New York Daily News, Teresa and husband Joe were convicted of mail, wire and bankruptcy fraud. They took out millions in falsified mortgage and construction loans to support their lavish lifestyle. Joe was also convicted of tax fraud, since he failed to file a return in 2004 and admitted he didn’t pay taxes on some $1 million in income between 2004 and 2008.
At sentencing, Judge Esther Salas was infuriated by the Giudice’s lack of transparency in their pre-sentencing disclosure documents. Among the omissions the judge seemed to think had dubious justifications were the estimates of the family’s furnishings and jewelry. The courts and the IRS have increasingly sophisticated tools for identifying discrepancies in stated earnings and assets, but in this case a simple paperwork trail proved enough.
That’s because when declaring bankruptcy in 2009, the Giudices listed $60,000 in furnishings, but only $25,000 on sentencing day. Other recreational vehicles, cars and construction equipment seemed also to be missing from the probation office report that managed to make it to the Feds. When asked why no jewelry assets were reported, the Giudice’s lawyer said Teresa wore only the costume type.
Judge Esther Salas gave Teresa 15 of the maximum 27 months but allowed her to spend the holidays with family. The judge also allowed Teresa’s husband to begin his sentence after hers expressly to maintain a parent in the household for their four children.
For Joe the sentence is 41 months, but even then he may not be altogether free. Although he has lived in New Jersey for most of his life, he never became a U.S. citizen and will likely face deportation.
Albeit this couple offers an egregious example of misconduct, it goes to show the seriousness with which the courts take tax and bankruptcy fraud. Particularly if, as some believe, the judge in this instance was being lenient, whether owing to the couple’s fame or other reasoning.
Should Teresa miss the spotlight facilitated by Bravo, she can take heart knowing she’s staying at the prison made famous by the Netflix original series “Orange is the New Black.” The reality of it all is that she’s likely to be back in the limelight fast, though maybe not at her NJ home since it was put up for sale. Once she’s free to go, she may very well pick up her hair extensions on the way out and get back to the celebrity life.
April 4, 2014
With only days left to file before the April 15th deadline, a lot of taxpayers are wondering whether they’ll be audited. The 2013 Data Book issued by the IRS is just the place to find the odds, which not surprisingly, go up as your income or business’s balance sheets do. This year’s report shows 1.0% of all individual returns were audited, but for those with income between $200k and $1 million that number grew to 1.4% and then jumped to 10.8% for income of $1 million or more. Approximately 1.4% of corporate returns were audited overall, but the rate ticked upward fast according to balance sheets, hitting up to 91.2% for corporations with $20 billion or more.
The IRS acknowledged in the report that ongoing budget constraints contributed to a 5% decline in audits between FY 2013 and 2012. Approximately 1.4 million individuals were audited, the lowest number since FY 2008. That’s good news for filers, right? Not necessarily. Here are three trends we’re seeing based on our experience representing hundreds of taxpayers and businesses:
Auditors’ Ability to Understand Complicated Tax Issues is Compromised –   Taxpayers aren’t the only ones challenged with navigating the 4,838 changes in tax code since 2001; its enforcers are, too. Do more with less, a mantra entrepreneurs of growing companies understand well, is one IRS auditors are also coming to terms with as a result of budget constraints.
Quality of Documentation Matters More Than Ever – Whether this is the IRS’ attempt to improve audit efficiency or reduce errors, we can’t know for sure. But the impression we’re getting is that auditors are adhering closely to a checklist of requirements, whether that list includes items actually required by regulations or not.
Auditors Don’t Always Understand How a Business Operates – We’ve seen auditors object to businesses with more than one landline and even deny deductions for businesses that reimburse salespeople for taking clients to lunch. What seems universal to us still needs to be defended to the IRS.
If you do get a notice of an examination, you don’t have to go it alone. Talley and Company’s tax and legal professionals can guide you through the process. We can submit requested documentation per an auditor’s preferred format, advocate for legitimate deductions taken by businesses in your specific industry, and go toe to toe with auditors through every inch of the tax code. Just remember that if the IRS comes calling you, you can call us.

Archives