Four people, including two from the Washington area, have been indicted by a federal grand jury in Maryland on charges that they ran a scheme in which they claimed millions of dollars in false tax deductions for donations of cemetery plots to charities.
As part of the scheme, the defendants used money from 97 investors to purchase more than 5,000 cemetery plots in Waldorf and Stafford County, federal prosecutors allege in the indictment.
During the scheme, alleged to have operated from 1996 through 1998, investors paid more than $2.3 million to get more than $10 million in deductions, according to the indictment, which was returned under seal by a grand jury in U.S. District Court in Greenbelt last week. The U.S. attorney's office in Maryland disclosed it yesterday.
The four-count indictment charges the defendants with one count of conspiracy to defraud the U.S. Treasury Department and three counts of aiding in the filing of false income tax returns, federal prosecutors said.
"Our tax system relies upon people honestly reporting and paying the taxes that they owe," said Maryland U.S. Attorney Rod J. Rosenstein. "People who cheat the IRS are cheating their friends, neighbors and fellow citizens."
According to the indictment, the four defendants formed a partnership and used investors' funds to buy the cemetery plots, which were later donated to charity. The partnership then filed returns with the Internal Revenue Service that falsified the purchase dates of the sites. The documents claimed the cemetery plots had been held for more than one year before being donated, the indictment alleges.
Laws allow taxpayers to take a deduction in the amount of the fair market value of property that has been held for more than a year. The partnership's tax returns claimed that the investors were entitled to a deduction for the purported market value of the cemetery sites, which was substantially more than the cost of the plots, the indictment says.
The defendants were identified as Glendle R. Johnston, 63, and John H. Ross, 57, both of Fredericksburg; attorney A. Thomas Thorson, 65, of New York; and certified public accountant Thomas D. Franks, 55, of Asheville, N.C.