Bradford, founder and manager of LL Bradford & Co., also operated a real estate business, operating and controlling a real estate investment partnership entity.
In 2011, he offered high-net-worth clients the opportunity to pay his partnership entity and receive tax deductions of approximately five to seven times the amount of money “invested.” Bradford told clients the payments entitled claim deductions based on losses from the partnership.
The Department of Justice noted tax laws do not permit the sale of deductions in exchange for an investment, nor did it incur losses or depreciation as large as the amount Bradford sold. He also did not report the investments as losses on client tax returns instead having their returns report fake deductions for cost of goods sold, professional and consulting fees or nonpassive losses.
In 2014, Bradford asked one client to make a $417,780 investment for depreciation-based losses to be put on the client’s 2013 Form 1120S. Instead, Bradford’s firm inflated the company’s cost of goods sold by $2,110,000, which cost a tax loss of about $860,627.