Wall Street Journal Tax Report, A Tax-Shelter Crackdown Uncovers a Dentist’s ‘Smile High Trust’:

Ryan Ulibarri, a family dentist in Fort Collins, Colo., is in tax trouble that could take a big bite of his time and money [Department of Justice Press Release].

In late August, a Denver grand jury indicted him on six criminal counts for using an “abusive-trust tax shelter” to hide more than $3.5 million of taxable income he earned from 2017 to 2022. He allegedly underpaid more than $1 million of tax over that period.

Now Ulibarri could go to prison for tax evasion, and he could also owe the Internal Revenue Service unpaid taxes plus interest and penalties. Ulibarri, who earlier this month pleaded not guilty to the government’s charges, declined to comment through his lawyer, Joshua Lowther of Lowther Walker. 

While most Americans aren’t in the market for tax shelters, the allegations in this case are a reminder of what can happen when taxpayers ignore professional advice and common sense on taxes. They also show how easy it can be for people who want to slash their taxes to delude themselves.

Ulibarri’s indictment is the latest in an IRS crackdown on shelters involving tax-reducing trusts that the agency considers “abusive,” its term for transactions that violate the law. In March, the agency posted an unusual warning about them on its website. The post gives details of typical schemes and says the agency has “detected a proliferation” of them aimed at wealthy individuals, business owners and professionals like doctors and lawyers.

Then in April, an indictment charged six people with conspiring to promote, sell or administer abusive trusts—including Ulibarri’s. In May, an Arizona tax preparer pleaded guilty to preparing and filing over 500 fraudulent returns for about 60 participants in abusive-trust shelters sold by the same promoters. The preparer admitted to helping conceal about $60 million of income, costing the Treasury about $17 million. …

Ulibarri’s indictment aids the crackdown by tying the scheme to a real taxpayer. It allegedly shows, step by step, what one person did to reduce his tax bills almost to nothing on the advice of a tax-shelter promoter.

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