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November 20, 2015

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Tax fraud charges and bankruptcy: a Texas case

Bankruptcy is by no means a sure-fire way to evade the IRS. An octogenarian widow of a Texas billionaire is finding this out now.

In this post, we will discuss the case of Caroline “Dee” Wyly, against whom the Internal Revenue Agency is seeking a $386 million tax fraud penalty. The agency is seeking this penalty despite the widow’s bankruptcy filing.

In a way, this is a follow-up to a post we did a little over a year ago. In our October 13 post last year, we wrote about an astoundingly large tax penalty imposed by the IRS against two Texas brothers for a fraudulent offshore tax evasion scheme.

One of these brothers was Charles Wyly, whose estate was hit with nearly $64 million in civil fines, plus interest. Dee Wyly is Charles’s widow.

Dee asserts that she was left insolvent after her husband died in a car accident four years ago. Her story is that, out of trust (or being perhaps being naïve) she signed off on joint tax returns filed by her late husband.

The IRS is still trying to collect a huge amount of back taxes from those returns. The agency is seeking more than $3 billion in taxes – a staggering amount – from Samuel Wylie and the estate of his dead brother, Charles.

Dee Wyly contends that she knew nothing of her husband’s allegedly nefarious offshore dealing. She has filed for Chapter 11 bankruptcy protection.

Tax Evasion