Connecticut Man Sentenced in Connection with Tax-Free Property Exchange Business - A Connecticut man who victimized exchangers in Massachusetts was sentenced yesterday for his role in a mail and wire fraud scheme involving a tax-free property exchange business.
Daniel E. Carpenter, 59, of Simsbury, Connecticut, was sentenced by U.S. District Court Judge George A. O’Toole to 36 months in prison, three years of supervised release, and a $100,000 fine. In June 2008, Carpenter was convicted of 19 counts of mail and wire fraud following a 13-day jury trial.
Former Benistar head charged with misappropriating $9M in client funds - The former chairman of Newton-based Benistar Property Exchange Co. has been charged with mail and wire fraud by a federal grand jury in connection with a scheme that allegedly resulted in the misappropriation of roughly $9 million in client funds, the Justice Department has announced.
Daniel E. Carpenter was charged in a 19-count indictment, according to U.S. District Attorney Michael Sullivan and Kenneth Kaiser, special agent in charge of the FBI in New England.
The United States Tax Court has held that the Benistar 419 Plan & Trust, crafted by Daniel Carpenter, was a plan that offered the same type of tax benefits as those listed in IRS Notice 95-34 (i.e., the deduction of contributions made to the trust arrangement). In fact, the benefits of the Benistar Plan were touted as "virtually unlimited." Promotional materials described the Benistar Plan as a trust arrangement that claimed to meet the 10-or-more employers-plan exemption under IRC Section 419A(f)(6), offering life insurance. The policies require large contributions relative to the cost of the amount of term insurance that would be required. When the participants in the plan have the right to receive the value reflected in the underlying insurance policies purchased by the plan, despite the fact that the payments of benefits are contingent upon the death of the insured while employed. As long as participants were willing to benefit by Benistar Plan's distribution policies, there was no reason ever to forfeit a policy. This event was viewed to be an unanticipated event. While noting that the plan does not reduce benefits if the assets derived from an employer's contributions are insufficient to fund all of the benefits promised to that employer's employees, the Tax Court found that since the plan does maintain separate accountings of the assets attributable to contributions in an "internal spreadsheet" and permits employers to make larger contributions, contributions are used only for the policy to which it is allocated. Thus, the Tax Court held that the Benistar Plan is a listed transaction, under I.R.C. Section 6707A(c)(2). The Tax Court further found that because the taxpayer failed to file IRS Form 8886, in years 2005, 2006, or 2007, they were liable for the penalty. The Court held that the IRS is not required to send personalized notices of the potential applicability of the penalty. The year end, December 31, 2004 was after the enactment of I.R.C. Section 6662A, and so this penalty provision is not retroactive, nor was it being applied retroactively in a way that might raise due process concerns. at 13-15.
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