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the Honolulu District Counsel’s Office, served as the project
attorney.
Once a tax shelter project is assigned to a particular
District Counsel’s Office, that District Counsel has the
authority to settle any individual case in the project. The
District Counsel generally is expected to adhere to the official
project settlement offer. Nevertheless, the District Counsel has
the authority in special circumstances to settle individual tax
shelter project cases on a basis different from the project
settlement offer.
2. Bauspar
One Kersting program that was not part of respondent’s
Kersting project was known as Bauspar. Kersting had promoted the
Bauspar program as a combination savings and low interest
mortgage plan. While the precise manner in which the Bauspar
program operated for each participant remains uncertain, the
total amount of home mortgage interest deducted by Bauspar
participants appears to have been overstated.
Respondent’s officials believed that there were relatively
few participants in the Bauspar program, that there was no easy
way to identify participants in the Bauspar program from a review
of their income tax returns, and that an investigation of Bauspar
deduction claimants would not be cost effective. Accordingly,
respondent ultimately decided not to systematically pursue
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