Varsity Blues

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Varsity Blues

Following an FBI sting known as Operation Varsity Blues, around 50 taxpayers were recently indicted on various federal charges related to falsifying applications for admissions to high-profile universities, such as Yale, Georgetown, University of Texas, and University of Southern California.  The charges include racketeering and money-laundering conspiracy, conspiracy to defraud, obstruction of justice, wire fraud, and – the biggie! – tax fraud. Among those charged are 9 athletic coaches and multiple affluential parents, including celebrities such as Lori Loughlin, Mossimo Giannulli, and Felicity Huffman.   

Federal prosecutors state that, in order to secure their children’s admissions to choice universities, parents charged in the case “paid out enormous sums” of money, totaling in excess of $25 million. Through Edge College and Career Network, a for-profit college counseling and preparation business, William Singer, the brains behind the scandal, hired standardized-test administrators to fake students’ test scores.  Singer also aided parents in falsely positioning their children as accomplished athletes to gain an edge in their university applications. The services were paid for through a questionable nonprofit established by Singer and known as The Key, so the parents could use the purchase price for admissions as healthy tax write-offs.

Predictably in today’s political climb, the fallout from the indictment has been swift, with the parents’ freedom uncertain, the implicated coaches’ careers over, and the students’ education at risk.  It remains to be seen how severely Uncle Sam will punish the parents for tax fraud, even if the tax fraud was intended to help educate young citizens. Ironically, those “donations” may well wind up purchasing the best education of all, not for the students, necessarily, but for the parents:  Don’t knowingly cheat on your taxes.

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Christy Lee

Christy Lee routinely writes about changes in tax law and current tax issues.