This post was originally published on Forbes Jul 17, 2015
For the last two decades Lance Wallach has been a voice crying out in the wilderness on the perils of 419(e) employee welfare plans. Lance is not an attorney, CPA or actuary. A graduate of Baruch College he trained as a financial planner with Mutual Benefit Life and then moved on to New England Life where he was a top producer selling life insurance as part of sophisticated plans. Now he speaks and serves as an expert witness helping to repair the damage done by insurance companies who promoted abusive tax plans.
The deficiencies stem from petitioners' participation in the Sterling Benefit Plan (Sterling Plan), a purported welfare benefit plan. The parties have selected these seven cases to serve as test cases for issues related to the Sterling Plan. The parties in approximately 40 other cases pending before the Court have agreed to be bound by one or more of the final decisions in these cases. (Emphasis added)
We conclude and hold that petitioners significantly underreported income on their Federal income tax returns for each subject year. In addition, the evidence shows (and we find) that petitioners consciously participated in a plan that, as advertised to them, they should have known (and probably knew) was too good to true. A reasonable person in the position of petitioners also would not have been oblivious to the fact that the judiciary had rejected the use of cash value life insurance to fund welfare benefits in similar settings.