Federal and International

Justice Department Sues to Shut Down Abusive Tax Scheme Involving Improper Deductions for Donating Timeshares

Washington, DC–(ENEWSPF)–November 24, 2015.  The United States filed a civil injunction suit seeking to bar James Tarpey, a Montana-based attorney, Project Philanthropy, Inc. (a District of Columbia corporation which does business as Donate for a Cause) and Timeshare Closings, Inc. (a Colorado corporation which does business as Resort Closings, Inc.) from promoting an allegedly abusive timeshare donation scheme, the Justice Department announced today.  The United States also filed suit against three of Tarpey’s associates – Ron Broyles of California, Curt Thor of Washington and Suzanne Crowson of Montana – all of whom, according to the complaint, assisted Tarpey in facilitating the timeshare donation scheme.

According to the complaint, which was filed in the U.S. District Court for the District of Montana, the timeshare donation scheme encourages timeshare owners to donate their unwanted timeshares to Donate for a Cause, a tax-exempt entity organized and operated by Tarpey.  The complaint states that customers are falsely promised “generous” tax savings and that the defendants purportedly determine the “fair market value” of the timeshare by selecting an independent, third-party appraiser.  The United States further alleged that Tarpey’s customers (the timeshare owners) pay significant processing fees to Resort Closings, Inc. to transfer the timeshares to Donate for a Cause.  According to the complaint, Tarpey, Broyles, Thor and Crowson appraise the customers’ timeshares in a manner which does not comply with the law and which significantly overvalues the timeshares.  According to the complaint, the appraisals fail to comply with regulations governing appraisals submitted with federal tax returns, contain substantive errors and omissions, fail to comply with generally accepted appraisal standards and grossly overvalue the timeshares.  In addition, Tarpey, Broyles, Thor and Crowson are legally prohibited from appraising the timeshares for which their customers claimed federal tax deductions because they are too closely affiliated with Donate for a Cause, the complaint alleges.

Finally, as stated in the complaint, Tarpey’s customers then claim improper and grossly inflated charitable contribution deductions on their tax returns for both the overvalued timeshares and the processing fees paid to Resort Closings, Inc.  The complaint alleges that Donate for a Cause is simply used as a conduit to briefly hold title to timeshares before they are sold for a fraction of the appraised amount.  For example, the complaint alleges that one customer transferred a timeshare to Donate for a Cause that had originally been purchased for $10,597.50.  Donate for a Cause used eBay’s charity platform to sell that timeshare to a third party for only $81, yet Tarpey appraised that timeshare for $8,740, the complaint states.

According to the complaint, the timeshare donation scheme was aggressively marketed via the Internet and through national and local media outlets, including ABC 7 News in Los Angeles, California; Fox 10 News in Phoenix, Arizona; the TODAY Show and Fox 4 News in Kansas City, Missouri. Clips of these news-based promotions are posted on the front page of the Donate for a Cause website.

In the past decade, the Tax Division has obtained injunctions against hundreds of tax return preparer and tax fraud promoters.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

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Source: www.justice.gov