On June 13, Suresh Gajwani, aged 78, admitted guilt to making a false and fraudulent statement to the Internal Revenue Service (IRS). The plea was entered in Miami. In 2018, Gajwani resided in Miami-Dade County. By October 2019, he owned a company with stocks and options that had significantly increased in value by tens of millions of dollars.
Gajwani aimed to benefit from a tax incentive program under Puerto Rico Act 60. This program allows bona fide residents of Puerto Rico to apply for an exemption from federal taxes on certain capital gains realized after becoming a resident. However, Gajwani did not become a bona fide resident until January 1, 2020, after his stock portfolio had already accrued built-in gains.
Advised by an accountant and attorney, Gajwani attempted to convert his company into a small business corporation (S Corporation) under the Internal Revenue Code to exploit the Puerto Rico capital gains tax exemption. He was also advised that built-in gains for U.S. residents accrued before becoming a Puerto Rican resident could be exempt from federal taxes.
In January 2020, Gajwani submitted false documentation to the IRS claiming that his company intended to convert as of January 1, 2019. He knew this was untrue and submitted the paperwork primarily to avoid paying capital gains taxes. The IRS approved his request based on this false statement.
In 2019, Gajwani’s company held approximately $30 million in built-in gains. Without the retroactive conversion approval by the IRS, about $7 million would have been owed in capital gains taxes for that year.
Gajwani is scheduled for sentencing on August 30 by Chief U.S. District Judge Cecilia M. Altonaga who will consider the U.S. Sentencing Guidelines and other statutory factors. He faces up to three years in prison and has agreed to repay around $15.3 million in restitution covering taxes, interest, and penalties.
The announcement came from U.S. Attorney Hayden P. O’Byrne for the Southern District of Florida; acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division; and Emmanuel Gomez, Special Agent in Charge at IRS Criminal Investigation.
The case is being investigated by IRS Criminal Investigation with Senior Litigation Counsel Michael N. Berger and Trial Attorney Curtis Weidler of the Tax Division prosecuting it.
Further court documents can be accessed via the website of the District Court for the Southern District of Florida or through their PACER system under case number 25-cr-20117.
