A federal jury has convicted the promoters of a trust-based tax shelter that prosecutors said caused approximately $40 million in tax losses, a verdict that underscores the risks facing those who market aggressive tax-planning arrangements.
The convictions followed a trial in Colorado involving a nationwide trust scheme that prosecutors said helped clients avoid federal income taxes while retaining control over assets and funds.
The central issue was whether the trust arrangement functioned as a legitimate tax-planning strategy or an unlawful tax shelter. Those convicted included people accused of promoting the structure, preparing tax returns connected to it and providing services for the trusts involved.
How the Alleged Trust Scheme Worked
A federal jury in Colorado convicted Marcia Predmore, Roderick Prescott, Suzanne Thompson and Weldon Wulstein of conspiracy to defraud the United States over what prosecutors described as an abusive trust tax shelter.
According to court documents and evidence presented at trial, the defendants promoted the arrangement to hundreds of high-net-worth business owners nationwide. Prosecutors alleged that the structure enabled clients to avoid federal income taxes on as much as 98% of their business profits. Clients reportedly paid between $25,000 and $50,000 to establish the structure and were told it would allow them to “own nothing, control everything.”
The convictions followed a jury trial, meaning prosecutors persuaded jurors that the charges had been proved beyond a reasonable doubt. According to the Justice Department, the tax shelter relied on four interconnected trusts described as a business trust, family trust, charitable trust and private family foundation.
Prosecutors said participants used the arrangement to claim deductions for personal living expenses that were not legally deductible and to claim charitable contribution deductions that were not supported by genuine charitable transfers. Prosecutors also argued that some participants continued to control assets and funds that had ostensibly been transferred to charitable entities.
Weldon Wulstein, a certified public accountant, was convicted of conspiracy and six counts of assisting in the preparation of false tax returns. Suzanne Thompson was convicted of conspiracy and six counts relating to the preparation of false tax returns. Marcia Predmore was convicted of conspiracy and six counts of tax evasion connected to her own use of the structure, while Roderick Prescott was convicted of conspiracy for his role in promoting the arrangement.
When Does Tax Planning Become Tax Evasion?
Trusts are lawful and widely used for estate planning, succession planning, charitable giving and asset management. The existence of a trust does not, by itself, create tax liability or criminal exposure.
According to prosecutors, the issue in this case was not the use of trusts but the way the arrangement allegedly operated. The Justice Department said the structure relied on multiple interconnected trusts that allowed participants to claim improper deductions, reduce taxable income and continue controlling assets and funds that had supposedly been transferred elsewhere.
According to prosecutors, the trusts in this case allowed participants to retain control over assets and funds while claiming tax benefits. If investigators conclude that a structure was created primarily to reduce or avoid tax without a genuine business, charitable or estate-planning purpose, both civil and criminal consequences can follow.
Cases involving trust-based tax shelters have been an enforcement focus for years, particularly where authorities believe advisers or promoters played a central role in developing and marketing the arrangement. The case also focused not only on taxpayers who used the structure, but also on the people accused of designing and promoting it.
Convictions and Potential Penalties
The defendants have been convicted but have not yet been sentenced. Each faces a maximum penalty of five years’ imprisonment for conspiracy to defraud the United States. Suzanne Thompson and Weldon Wulstein also face potential prison terms relating to their convictions for assisting in the preparation of false tax returns, while Marcia Predmore faces additional exposure arising from the tax evasion counts. A federal district court judge will determine the final sentences after considering the U.S. Sentencing Guidelines and other statutory factors.
The investigation was conducted by IRS Criminal Investigation, the agency responsible for investigating criminal violations of federal tax laws and related financial crimes. The case focused not only on taxpayers who used the structure, but also on the people accused of designing, marketing and operating it.
According to the Justice Department, Wulstein prepared tax returns connected to the arrangement while Thompson provided bookkeeping and financial statement services for trust entities used within the structure. The case shows that tax investigations can extend beyond taxpayers to advisers, promoters and others involved in designing or administering a structure. Accountants, tax preparers, advisers, consultants and promoters can find themselves under investigation if prosecutors believe they knowingly helped create or operate an unlawful tax scheme.
A criminal conviction can carry consequences long after any sentence has been served. Professional licences may be affected, business relationships can be disrupted and future dealings with regulators may become more difficult. The prosecution reflects continuing enforcement attention on the advisers and promoters behind alleged tax shelter arrangements.
When Tax Planning Crosses the Line
The defendants have been convicted, but sentencing has yet to take place. The federal court will determine the penalties after considering the U.S. Sentencing Guidelines and other statutory factors.
The prosecution focused on a trust arrangement that authorities said generated improper tax benefits while allowing participants to retain control over assets and funds. Jurors ultimately found the defendants guilty after hearing several weeks of evidence about how the structure operated and how it was marketed to clients.
Those convicted were not limited to people who used the arrangement. The verdicts also covered individuals accused of promoting the structure, preparing tax returns connected to it and providing services for the trusts involved. Tax shelter investigations frequently examine the advisers, preparers and promoters behind a strategy as well as the taxpayers who adopt it.
Trusts remain lawful and widely used for estate planning, charitable giving and asset protection. The dispute in this case was whether the arrangement served a legitimate purpose or functioned primarily as a vehicle for avoiding federal income tax. That question continues to sit at the heart of many tax shelter prosecutions.