How can I prove to the IRS my parents aren't rich?

[AbcAbcwebd]

My parents have many wonderful qualities, but unfortunately they've never been very good at managing money.

A few years ago, they proudly told me they'd invested a portion of their savings into a start up that claimed to have a new invention that would solve the energy crisis (using a technology that "disproved" Newtons laws). The company had also, they said, cured cancer, revolutionized batteries, kidney dialysis, paper and were getting very close to a cure of HIV/AIDs, among a staggering portfolio of other things.
It appears the company was also selling significant quantities of private stocks to non-accredited investors, like my parents. The company failed to file appropriate paperwork with the SEC in a timely manner, greatly exaggerated the company's assets during investor meetings, and sent misleading information to investors.

When my parents told me about the company, I couldn't believe they'd fallen for it, and asked them to please read up on investing and consult a lawyer. The company had promised to make them billionaires, however, and they certainly didn't want to listen to any of my doom and gloom.
Unable to convince them, I let it go, figure the worst that could happen was they'd lose the couple thousand dollars they'd invested and be very disappointed.

Flash forward and the value of their "investment" has, according to the company, gone way up. On paper my parents are now quite wealthy. But of course it's all non-liquid private stocks they can't actually sell. I know, and they're beginning to realize, that these shares are worth no more than monopoly money, but the IRS apparently thinks they're real, and just sent them a bill for $100,000.

My parents are working class people and have no hope of coming up with that type of money. Is there a way I can contact the SEC or the IRS and convince them these investments aren't actually worth anything?

My mother says they can't afford to hire a lawyer, but they certainly can't afford to pay those taxes either.

Thanks in advance to anyone able to point me in the right direction!


What is the name of your state (only U.S. law)? North Carolina
(Moderators, feel free to move the thread if this is the wrong category.)

 

[adjusterjack]

Thanks in advance to anyone able to point me in the right direction!

The right direction is to a tax attorney.

Sorry, but if they can't afford one, they are pretty well screwed.

 

[AbcAbcwebd]

The right direction is to a tax attorney.

Not the cheap and easy answer we were hoping for, but I expect you're right.
I'll talk to them tomorrow and see what we can figure out.

Thank you for the fast and honest reply.

 

[LdiJ]

Not the cheap and easy answer we were hoping for, but I expect you're right.
I'll talk to them tomorrow and see what we can figure out.

Thank you for the fast and honest reply.

See a tax professional first, to specifically identify what kind of "income" this company reported that would result in your parents owing 100k.

 

[davew128]

See a tax professional first, to specifically identify what kind of "income" this company reported that would result in your parents owing 100k.

Particularly if it was trying to get listed and publicly traded, which would change who gets taxed on any income real or imagined.

 

[LdiJ]

Particularly if it was trying to get listed and publicly traded, which would change who gets taxed on any income real or imagined.

My concern is that if they simply bought shares in this company and have not sold those shares then there would be no realized gain. If they bought a limited partnership then there could be false income, but I do not see how it benefits the con artists to issue K-1s with that kind of income. Its just going to get them investigated all the more quickly. Therefore I really think that before a tax attorney is retained, they really need to know how this income was reported.