Saturday, September 30, 2023
Courthouse News Service
Saturday, September 30, 2023 | Back issues
Courthouse News Service Courthouse News Service

Man Wages $1.3 Million Fight With the IRS

LAREDO, Texas (CN) - A businessman sued the IRS for demanding half of his life's savings - $1.3 million - for a mistake he says his accountant made by checking the wrong box.

The IRS must prove he "willfully failed" to report his Swiss bank account to take the $1.3 million penalty from it, Bernhard Gubser says in his Dec. 15 federal lawsuit - and he didn't willfully fail to do anything.

Bernhard Gubser is a Swiss national whose apprenticeship with the Swiss railroad system led to an import-export career in the United States, where he naturalized in 1992.

He has been president of Transmaritime Inc., a Laredo freight logistics firm, for 33 years, according to his LinkedIn page.

Gubser says his work often took him back to Switzerland, so he opened a bank account there to cover his living expenses.

"Gubser always intended to return to Switzerland upon retirement," the complaint states.

In 2008 his Swiss account held his $2.8 million life savings, "from lawful sources ... after-tax compensation and inheritances," he says in the complaint.

Gubser says his Texas CPA Ernesto Dominguez, who had done his taxes for 20 years, made an unwitting mistake in his 2008 tax filing.

Dominguez checked "No" on the "Foreign Accounts and Trusts" section of Gubser's tax return and no one from the accounting firm asked Gubser until 2010 if he had any foreign accounts, according to the complaint.

Dominguez is not a defendant in the lawsuit. The defendants are the Internal Revenue Service and its Commissioner John Koskinen.

Gubser says that when he learned about the so-called "FBAR" requirement, he filed it for 2009 and in every year since. (The acronym stands for Report of Foreign Bank and Financial Accounts.)

IRS auditors did not catch the mistake for six years.

But in 2014 the IRS told him his failure to file an FBAR in 2008 was a "willful violation," and that "the amount of the asserted penalty would be 50 percent of the balance in the unreported foreign account at the time of the violation."

The IRS assesses drastically different penalties for "willful" and "non-willful" FBAR violations.

"The civil penalty for a non-willful failure to file an FBAR is $10,000. The penalty for a willful failure to file is the greater of $100,000 or one-half the value of the undisclosed account," according to the complaint.

Gubser says he never willfully concealed his Swiss account. He says an IRS appeals officer admitted to his attorney on Sept. 10 that it cannot prove he acted willfully, but that it "can meet its burden by a mere preponderance of the evidence," and the IRS has not backed down from its demand for $1.3 million.

Gubser says the IRS is misreading the statute and its burden of proof is much higher.

He seeks declaratory judgment that "the IRS must prove willful violations of the FBAR filing requirement by clear and convincing evidence," rather than a preponderance of the evidence.

He is represented by Mackenzie Martin with Baker McKenzie in Dallas.

Follow @@cam_langford
Categories / Uncategorized

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.