Shredding Their Taxes?

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Author: Novack, JanetBarrett, William P.

The Internal Revenue Service says that three California investors who sold document-destruction pioneer Insta-shred Security Services to an Australian firm in 2001 used a sham shelter to avoid taxes on $60 million in capital gains. Sellers Donald R. Thorne, Issie Rabinovitch and Thomas Dunlap are in the U.S. Court of Federal Claims fighting the bill plus assessed penalties of up to 40%. The feds say that the men used eight entities they created and a dubious $64 million loan to increase their tax basis in 2000 and reduce the resulting gain and taxes due. The trio replies that it was motivated by "certain asset protection and estate planning goals."

PHOTO (COLOR): Paper gains: Dunlap and Thorne.

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By Janet Novack and William P. Barrett