At the beginning of this month, the US District Court for the Ohio district imposed a summary judgment reporting that the foreign bank and financial accounts survived for the purpose of the desired death.
In you.S. v. LeedsCase no. 1: 22-CV-00379-AKB (7 March 2025), Richard Leeds, an American citizen, failed to discover two foreign bank accounts he held through FBAR. In the facts marked by the court, Richard used nicknames to manage the accounts held at EFG Bank and even requested “postal holder” instructions so that the documentation could only be obtained in the account. Richard also confirmed in writing through his annual tax organizer for his US training that he, in fact, had no financial interest in a foreign account, and his returns did not reflect the income earned in those accounts. Based on this representation, his returns to the US were prepared, noticing “no” to the FBAR question in Program B, Part III, Question 7a. Richard signed these returns under the punishment of destruction.
The court noted that EFG entered into a non-defense agreement with the US Department of Justice, and in that agreement, EFG identified numerous practices offered to its US clients to allow them to avoid tax liabilities in the United States. Among those practices were the “code name services” and “hold mail services”, both used Richard.
By October 2011, EFG envisioned to implement the foreign account tax compliance act and inform Richard that US account holders were no longer welcomed in EFG. Richard converted all non-Para's assets into account, bought precious metals and withdrew the balance in person. He then directed EFG to close the accounts.
In 2014, EFG informed Richard that all Swiss banks would broadcast to the US and asked him to consider participating in the Voluntary Internal Service Discover Discover to detect the reported accounts. Richard asked EFG if reporting would return only in 2008 and if closed accounts were reported, that is, would he be part of this transmission?
Investigation of IRS
During 2014, the IRS began investigating Richard and in December, Richard submitted its volunteer intelligence letters and was approved for participation in OVDP. In June 2015, Richard presented the initial FBars for EFG accounts from 2006 to 2012 and later changed them “to correct errors in account values”. The court noted that the highest maximum total value of accounts exceeded $ 2 million. He also presented changed returns and included foreign income before. Richard chose OVDP and IRS immediately began an exam.
IRS targets the woman
The IRS concluded that deliberate sentences were guaranteed and rated Richard a total sentence of $ 1,518,883. With Richard's death in November 2021, the IRS pursued actions against Patricia Leeds, Richard's wife, as a descendant in the interest of Richard's assets, as well as a “distributor” of assets. Patricia was named “for the limited purpose of defense against this litigation”.
Patricia argued that the sentences of the FBAR were evaluated when Richard died, that deliberate behavior is a reliable fact and that the sentences violated the clause of excessive amendment fines.
Deliberate behavior
The court concluded that there is no genuine dispute that Richard's failure to present was intentionally under the standard of objective relentlessness. The court adopted “an unmistakable standard standard” than if the will returns to Richard's subjective purpose, as Patricia argued. According to this objective standard, a determination that a taxpayer failed to submit an FBAR requires a finding that the filler: (1) clearly had to know that there was a serious risk that the appearance requirement was not met; and (2) positioned to detect some some easily.
The court noted that Richard did acts to hide his EFG accounts and expressly denied having foreign accounts AND foreign income. Moreover, with the change, the returns show that Richard kept over half of his total income in EFG accounts. The court concluded that “the facts undoubtedly indicated that even if Mr. Leeds lacked the knowledge of reporting request, he should have objectively known that there was a serious danger that he was not fulfilling that request and that he was positioned early to discover that request, but refused to do so.” Therefore, the court found that the government was entitled to maximum sentences for Richard's deliberate failure to submit FBars.
The eighth change
The court examined whether the FBAR sentences are “fine” in the sense of the same. As noted in the court ruling, there are two competitive views on the subject: (1) FBAR sentences are improving and not punitive; and (2) fbar sentences are punitive. The court ultimately found the eleven district decision in We v. Schwarsbaum, 127 p.4Th 259 (11Th Cir, 2025), who discovered that FBB's parties are punitive, To be more convincing and reasonable.
Using this starting point, the Court found that FBAR sentences were not extremely disproportionate to Richard's behavior in hiding accounts, avoiding his tax obligations and using codes' names, etc., to avoid his appearance obligations in the US. As such, the Court concluded that the government may seek to recover sentences from the property and patricia, but may not recover the sentences of Patricia individually.
Moreover, the court found that these sentences were not “extinguished” when Mr. Leeds. The court, relying on both Reisierer vs. United States 479 p.3d 1160, 1162-63 (9Th Cir. 2007)
and the decision of the US Supreme Court in Hudson v. United States, 522 US 93.99-100 (1997)
concluded that the FBAR sentences were punitive and correcting for survival; As such, the Sentences of the FBAR survive Richard's death.
Strict application
This latest addition in the anthology of the FBAR Affairs Law underlines the relentless and strict penalty implementation of the FBAR. Richard's actions were aimed at avoiding, and the court ruling is a strong reminder that a determination of the will should not be taken easily, as the applicable sentences survive death and remain applicable against assets. The court's decision, however, creates a very important distinction between the responsibility of assets and personal responsibility for the executors or those considered “distributors”. of wealth. As mentioned above, recovery must come from the assets of the assets, not those of the surviving spouse's executors/distributors. FBAR legal landscape continues to evolve while courts try to clarify this complex area of law.