International Automated Systems (fka IAUS)

[scion]

87. Defendants encourage customers to “purchase” more lenses than the customer actually “needs” to zero out his or her tax liability for the current tax year by telling customers that “excess” § 48 energy credits and depreciation expense losses can be carried back to prior tax years and carried forward to future tax years.

88. In fact, some of Defendants’ customers filed amended tax returns to carry back the bogus depreciation expense losses and/or § 48 energy credits they claimed as a result of buying in to Defendant’s abusive solar energy scheme.

89. The false depreciation expense losses and/or § 48 energy credits that Defendants’ customers carried back to prior tax years reduced or “zeroed out” the tax they owed in those years.

90. But Defendants’ customers are not entitled to the false depreciation expense losses and/or § 48 energy credits they carried back to prior tax years as a result of buying in to Defendants’ abusive solar energy scheme.

91. Similarly, some of Defendants’ customers have carried forward a false depreciation expense loss and/or § 48 energy credits that they claimed as a result of buying in to Defendants’ abusive solar energy scheme.

92. Defendants’ customers are not entitled to the false depreciation expense losses and/or § 48 energy credits that they have carried forward into future tax years, or may attempt to carry forward into future tax years.

93. Defendants’ customers Person L and Person M, Oregon residents and a married couple who filed jointly each year described below, were “sponsored” into the solar energy scheme by Freeborn. Their tax returns for 2011 and 2012, provide an example of the way that a wrongful carried-forward depreciation expense loss causes harm to the government:

a. Person L purportedly purchased at least 26 lenses from RaPower-3 in tax year 2011.

b. Shepard, on behalf of RaPower-3, sent Person L a letter stating that these lenses were placed in service in tax year 2011, which would “qualify [Person L] for the . . . solar energy tax credit.”

c. Person L and Person M reported $46,422 in wages, salaries, and tips from W-2s on their tax return.

d. On their tax return, Person L and Person M claimed a Schedule C “solar energy” business loss of $76,870 largely as a result of the “depreciation” they claimed on the lenses Person L purportedly bought through Defendants’ solar energy scheme.

e. Subtracting the Schedule C loss from their ordinary income, and applying other income and deductions, Person L and Person M claimed on their tax return that their adjusted gross income for tax year 2011 was negative $36,800.

f. Due to this false loss, and in light of other deductions Person L and Person M applied, they claimed taxable income of $0, according to their return. Accordingly, Person L and Person M reported that their tax for 2011 was $0.

g. Then, for tax year 2012, Person L and Person M reported $46,801 in wages, salaries, and tips from W-2s on their tax return.

h. On their tax return, Person L and Person M claimed a Schedule C business loss of $2,170 from Person L’s purported business involving “solar power” and called “Ra Power 3.” The total amount of the claimed loss from the “solar power” business resulted from $1,055 in income, and $3,225 in “depreciation” on lenses Person L purportedly bought through Defendants’ solar energy scheme.

i. In addition, Person L and Person M claimed a “net operating loss” due to their negative $36,800 adjusted gross income from tax year 2011. Person L and Person M used this carried forward “net operating loss” to offset much of their remaining income, which resulted in their claimed adjusted gross income of $8,943.

j. Due to these false losses, and in light of other income and deductions Person L and Person M applied, they claimed taxable income of $0, according to their return. Accordingly, Person L and Person M reported that their tax for 2012 was $0.

k. But Person L and Person M were not entitled to the losses that they claimed for tax years 2011 and 2012 for the reasons described herein.

94. Most of Defendants’ customers, like the customers in the examples above, participated in the solar energy scheme for two, three, four, or more tax years to date. On information and belief, such customers continue to “buy” new lenses each year – in spite of not having received rental income from the lenses they “bought” in prior years – because they continue to avoid paying tax on their income, and often receive large tax refunds to which they are not entitled, as a result of participating in Defendants’ abusive scheme.

95. Defendants’ abusive solar energy scheme is designed to generate money for their customers from tax savings alone, regardless of the actual performance of the lenses.


Extract -
Doc 2 PDF file
https://www.scribd.com/doc/291081416/USA-v-RaPower-3-Et-Al-Doc-2-Filed-23-Nov-15