Even when times were good in the real estate business, getting caught for lying to the IRS was bad for business.
Monterey Realtor Cheryl Savage was sentenced to 14 months in prison and ordered to pay a $10,000 fine, as well over $123,000 in restitution for tax evasion.
Savage sold two rental properties in 2004, netting a $777,014 taxable gain. On her tax returns the next year, she reported that those proceeds went toward purchasing a replacement rental property, a loophole that helps landlords defer capital gains taxes as they buy and sell properties.
However, Savage used that revenue to buy herself a home on Via Del Milagro in Monterey, according to an announcement released by United States Attorney Melinda Haag and Special Agent José M. Martinez of the IRS Criminal Investigation unit. She also falsely reported having received rental income on that property, where she actually lived.
Savage became a broker and opened Steinbeck ERA Realty in Salinas in 1981. She's no longer listed on the firm's website, but according to Haag's announcement, Savage's bio described her as an expert on 1031 Tax Deferred Exchanges—the same landlord protection she had used to reinvest in her own personal property, although 1031 is a carve-out specifically for reinvesting in rental properties.
Savage was charged by a federal grand jury on October 4, 2011 with three counts of tax evasion. She pleaded guilty to one count last September.
Photo courtesy 401(k) 2013 via Flickr.