COURT SHUTS DOWN ALLEGED "ABUSIVE TIME SHARE DONATION SCHEME"

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, September 29, 2016

Federal Court Shuts Down Abusive Tax Scheme Involving Improper Deductions for Donating Timeshares

A federal court in Helena, Montana has permanently barred Montana-based attorney James Tarpey, as well as two companies he founded, including 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.  Tarpey and the two companies agreed to the injunction.

According to the complaint, based on false promises of generous tax savings, Tarpey, Donate for a Cause and Timeshare Closings encouraged timeshare owners to donate their unwanted timeshares to Donate for a Cause, a tax-exempt entity organized and operated by Tarpey.  The complaint alleges that the customers receive an appraisal that grossly overvalues the donated timeshare rights and customers use that appraisal to claim a large charitable donation deduction, even when the true market value of the timeshare right is a small fraction of the appraised value.

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, Fox 10 News in Phoenix, Arizona, the TODAY Show and Fox 4 News in Kansas City, Missouri.

The orders permanently bar Tarpey, Donate for a Cause and Timeshare Closings from promoting or marketing any arrangement that involves charitable contribution deductions claimed on federal tax returns.  The orders also bar Tarpey, Donate for a Cause and Timeshare Closings from preparing, or assisting others in preparing, any property appraisal that will be used in connection with federal taxes.  The orders require Tarpey, Donate for a Cause and Timeshare Closings to post a copy of the injunction on websites that they use to advertise timeshare donations, including but not limited to www.donateforacause.org.  The orders also require that Donate for a Cause notify all of its customers of the injunction and that Tarpey and Timeshare Closings notify their employees involved with timeshare donations of the injunction.

The United States also sued three individuals alleged to be Tarpey’s associates Ron Broyles of California, Curt Thor of Washington and Suzanne Tarpey of Montana.  According to the complaint, these individuals assisted Tarpey in facilitating the timeshare donation scheme.  Thor previously consented to an order permanently barring him from preparing timeshare appraisals and giving advice regarding charitable contribution deductions on federal tax returns.  The government’s claims against Broyles and Suzanne Tarpey remain pending with the court.

The Internal Revenue Service (IRS) warns taxpayers to be wary of scams that involve claiming inflated charitable contribution deductions and recommends anyone who may have improperly claimed such deductions to consult a tax professional.  Guidelines for valuing and deducting property donations to charity can be found in Publication 526 and Publication 561, available on IRS.gov.

Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, thanked Revenue Agent Kate Lopez of the IRS, who conducted the investigation and Trial Attorneys Richard G. Rose, Harris J. Phillips and Gretchen E. Nygaard of the Tax Division, who are litigating this case.

In the past decade, the Tax Division has obtained injunctions against hundreds of tax return preparer and tax fraud promoters.