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TAX TRENDS
Analysis of and reflections on
recent cases and rulings.
Author: During 2007, the tax year at issue in the
James A. Beavers, CPA, CGMA, Procedure & Administration proceeding, both UBS accounts car-
J.D., LL.M. ried balances of significantly more than
Counsel’s admission costly $10,000. He closed the accounts at the
to taxpayer in FBAR case end of 2008.
The Third Circuit affirmed a district Bedrosian did not tell his accountant
court’s holding that a taxpayer’s fail- about the existence of the two accounts
ure to report his foreign accounts on until 2006, claiming he had failed to
FBAR violation held Financial Crimes Enforcement Network do so because the accountant had never
(FinCEN) Forms 114, Report of Foreign asked about them. The accountant, upon
to be willful; IRS Bank and Financial Accounts (FBAR), learning of the accounts, told Bedrosian
cannot withhold was willful. However, while it did not he was and had been required to report
agree with the district court that the IRS on his personal tax returns that he had
disclosure of certain had proved the amount of the penalty the foreign bank accounts and file any
returns and return assessed against the taxpayer, the Third FBARs for them. According to Bed-
rosian, on advice of the accountant, he
Circuit nonetheless upheld the penalty
information in Tax amount because it found the taxpayer’s did not report the accounts on his 2006
counsel had admitted in the court pro- personal returns.
Court whistleblower ceedings that the balance in the taxpayer’s Bedrosian’s accountant died in 2007
review case. undisclosed foreign account was enough and, working with a new accountant,
to support the penalty assessed. Bedrosian finally disclosed his foreign
accounts on his 2007 tax return and a
Background 2007 FBAR. However, his disclosure in
Arthur Bedrosian is a U.S. citizen who the 2007 FBAR was somewhat less than
has worked in the pharmaceutical indus- complete. It listed only one of the UBS
try since the 1970s. He has been highly accounts with a balance of $240,000, even
successful in his career, rising to the though the second account’s balance was
position of CEO of a generic drug manu- approximately $2.3 million. He did not
facturer. In the early 1970s, when he was report any of the income from the ac-
still a manufacturer’s sales representative, counts in 2007 on his personal return.
he opened a bank account with a Swiss The IRS found out about Bedrosian’s
bank that would later become United account in the 2000s when the U.S. gov-
Bank of Switzerland (UBS). Sometime ernment negotiated an agreement with
during 2005, he opened a second account Swiss banks to provide it account infor-
with UBS, although Bedrosian claimed mation about their customers. The IRS
he considered them to be one account. opened an investigation of Bedrosian in
Bedrosian met with a UBS banker once a 2011, and eventually the Service assessed
year to review the accounts’ performance. the maximum penalty under the Bank
52 October 2022 The Tax Adviser
