Quote:
Originally Posted by GrayGoose
It seems the IRS is about to declare that the bonds that Morse sold over the years as municipals did not qualify as municipals. IRS has been auditing these instruments for about a year and what it boils down to, by example, is Morse would sell $60M of municipal bonds, use maybe $4m to build something like a rec center or the Savannah Center, and pay off the bonds over time out of homeowner monies. He would then turn around and sell the building (with and assessed value of $6m) back to one of the VCCDDs at $60M, thus netting himself $54m profit. IRS believes this is illegal for a number of reasons (google the Villages municipal bonds). It is believed that IRS is going to try to get him on as much as $271m + interest + penalties. This is a very complex issue but well spelled out in some of the articles you will find on line. The Orlando Sentinel has an investigative reporter doing some articles that are excellent.
IRS ranks participants in circumstances like this from least liable to most liable. In this case the bond purchasers are least liable, the home buyers next, the VCCDDs next, and finally Gary Morse most liable. That means that if the IRS does go after the Villages (and it looks like they are going to) Morse might be destroyed. Unfortunately the VCCDDs have no money but do have taxing power. They would be the next target after Morse so the only way they can get money is to tax homeowners. That tax burden could amount to approximately an $18,000 assessment per household.
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I attended the AAC meeting at Savannah this week and this very topic came up. It seems that this is not the first time and the IRS has always found no fault. One of the previous dates I remember from the meeting was in 1999 and I think again in 2003 (not sure about that one). Seems like there is a lot of panic for nothing. Lots of answers to lots of things can be found at these meetings. Check out the AAC for yourselves sometime...very interesting.