Lawfuel – The Law Newswire – Los Angeles, California – A Beverly Hills man pleaded guilty today before United States District Court Judge Dean D. Pregerson to one count of conspiracy to defraud the Internal Revenue Service in its assessment, and collection of income taxes by creating fraudulent charitable contribution deductions for his clients as well as to one count of subscribing to, under penalty of perjury, a false income tax return in his own name.
George Ray Hawkins, owner and operator of G Ray Hawkins Gallery, an art gallery located in Los Angeles, California, admitted that, beginning in 1997 and continuing to September 2003, he had conspired with other individuals to impede, impair, obstruct, and defeat the lawful government functions of the Internal Revenue Service in ascertaining, computing, assessing, and collecting income taxes. Hawkins admitted to falsifying the records used by his clients to claim deductions for charitable contributions on their tax returns. Hawkins provided his clients with backdated appraisals for alleged donations of non-cash charitable contributions for the purpose of claiming fraudulent contribution deductions on their federal income tax returns, so as to unlawfully assist in reducing his clients’ taxable income and respective income tax liabilities.
In the past, Hawkins had previously prepared appraisal packages which related to art items he had donated to charitable institutions. Hawkins would sell the previously prepared appraisal packages to his clients and would fraudulently insert, with the knowledge and agreement of the participating clients, the clients’ names on the appraisal packages. Further, Hawkins, again with the knowledge and agreement of his clients, would falsely backdate the appraisals so that his clients could take advantage of donations made by him, on their personal income tax returns, for the tax years from which they would receive the greatest benefit in reducing their taxable income.
During the period that he engaged in the conspiracy to defraud the Internal Revenue Service, Hawkins, by virtue of his involvement, caused at least twenty-four false income tax returns to be filed on behalf of at least fourteen clients. These twenty-four income tax returns filed by Hawkins’ clients claimed more than $379,085 in false deductions for charitable contributions.
In addition to conspiring with his clients to reduce their federal income tax liabilities by creating fraudulent charitable contribution deductions, Hawkins utilized the same techniques to reduce his personal tax liability. Hawkins admitted to subscribing to false 1997, 1998, and 1999 Joint Federal Income Tax Returns, Forms 1040, upon which he personally claimed deductions for charitable contributions of artwork in the amounts of $43,000 in 1997; $39,450 in 1998; and $42,700 in 1999. In each case, Hawkins knew that the returns were not true and correct as to every material matter because, by pre-dating appraisal documents filed with his tax returns, Hawkins’ returns falsely claimed deductions for charitable contributions for the years in question. Further, in support of his claimed deductions, Hawkins attached to each of the three income tax returns he filed a Form 8283 – Noncash Charitable Contributions, which Hawkins knew had been prepared, in substance, by himself, rather than by a qualified appraiser.
For a charitable donation of art in excess of $20,000 to be claimed as a deduction on a tax return, a taxpayer must obtain a qualified appraisal for such property being contributed and attach a complete copy of the signed appraisal to the Form 8283 – Noncash Charitable Contributions, which is then required to be attached to the tax return claiming such deduction. A qualified appraisal requires, by law, that the appraiser not be either the donor of the item(s), or the taxpayer who claims a deduction for the property being donated and appraised.
When sentenced for his tax crimes, Hawkins faces a statutory maximum of eight (8) years imprisonment followed by three (3) years of supervised release and fines of approximately $500,000. Hawkins sentencing is scheduled for October 22, 2007
The investigation and prosecution of Hawkins was handled by IRS Criminal Investigation and the United States Attorney’s Office in Los Angeles.
For more information on the requirements that must be met in order to deduct charitable contributions, refer to Publication 526, Charitable Contributions; Publication 561, Determining the Value of Donated Property; Form 8283, Noncash Charitable Contributions, and its instructions; and Tax Topic 506, Contributions. These items can be found at the IRS website located at www.irs.gov.
