Ethics in Filing Investment or Theft Loss Claims

However, rather than impartially analyzing a taxpayer’s circumstances to evaluate whether the taxpayer can legally claim a theft-loss deduction, the FRG Defendants intentionally, or at least with reckless indifference to contrary facts, prepare new or amended tax returns claiming theft-loss deductions for virtually every customer who agrees to pay them a fee. In this respect, the FRG Defendants grossly abuse Section 165 and pervert its true intent, all for the purpose of extracting the greatest amount of fees possible from their customers.
— UNITED STATES OF AMERICA, Plaintiff, v. TOBIAS H. ELSASS, et al., Defendants. #89.

Attorneys and certified public accountants have been sanctioned by the IRS for filing refund claims involving theft losses without verifying compliance with United States Tax Law. In United States of America v. Elsass, 978 F.Supp. 2d 901 (2013), aff;d 769 F.3d 390 (6th Cir. 2014), the Court sanctioned a tax return preparer for frivolously preparing theft loss claims without complying with the due diligence requirements of Circular 230. For attorneys and certified public accountants who do not frequently practice in this area, attached are links to the Court’s Opinion in the Elsass case and Circular 230.  See USA v. Tobias H. Elsass, et al.

United States of America v. Tobias Harold Elsass, Sensible Tax Solutions, Inc., and Fraud Recovery Group, Inc., Complaint for Permanent Injunction and Other Relief, U.S. District Court for the Southern District of Ohio, Eastern Division, Case No. 2:10-cv-336, filed April 19, 2010

United States of America v. Tobias H. Elsass, et al., Memorandum Opinion and Order, U.S. District Court for the Southern District of Ohio, Eastern Division, Case No. 2:10-cv-336, filed October 17, 2013

United States of America v. Tobias Harold Elsass, Fraud Recovery Group, Inc., Sensible Tax Solutions, Inc., Opinion, United States Court of Appeals for the Sixth Circuit, Case No. 2:10-cv-336, filed September 12, 2014