Aventura investor pleads guilty to lying to IRS over $30M in Tesla stock profits
In October 2019, Aventura investor Suresh Gajwani made a killing on Tesla stock, reaping tens of millions of dollars in profits.
But rather than play it straight on his capital gains taxes that were due to the federal government, Gajwani tried to evade his obligation by lying that he made the $30 million windfall when he was a resident of Puerto Rico, authorities say.
Under the U.S. territory’s law, investors could apply for certain capital-gains tax exemptions if they realized their investment profits after becoming residents of Puerto Rico.
On Friday, Gajwani, 78, admitted that he wasn’t a resident of Puerto Rico when he made the huge Tesla stock profits, as he pleaded guilty in Miami federal court to making a false and fraudulent statement to the IRS on his investment company’s tax return in 2019.
Gajwani faces between six months and one year in prison at his sentencing on Aug. 30 before U.S. District Judge Cecilia Altonaga. As part of his plea deal, he has agreed to repay about $15.3 million to the Internal Revenue Service, including $7 million in capital gains taxes owed in 2019, plus interest and penalties.
Gajwani formed his investment company, Nimco II Corp., in July 2018. At his plea hearing, Gajwani admitted that he obtained advice from an accountant to convert it from a “C” corporation to an “S” corporation to limit his capital gains taxes after he made millions off his investment in the electric-car company’s stock the following year.
The accountant, who is not identified in court records, advised Gajwani to make the corporate conversion so it could qualify for Puerto Rico’s capital-gains tax exemption, according to prosecutors with the U.S. Attorney’s Office in Miami. But the accountant “falsely and fraudulently represented” on an IRS form that Gajwani’s company, Nimco, made the corporate conversion on Jan. 1, 2019 — a full year before the investor moved from Miami to Puerto Rico.
In his guilty plea, Gajwani admitted that he signed the IRS form showing he changed the corporate status of his company, Nimco, with the false retroactive date of Jan. 1, 2019. He submitted the form to the IRS in late January 2020, and the tax agency approved the corporate conversion with the falsified retroactive date.
At the same time, Gajwani obtained an opinion letter from an unidentified attorney saying that his converted corporation could be sourced to Puerto Rico and exempt from capital gains on the Tesla stock even if the profits were made before he became a resident of the U.S. territory.
“IRS senior representatives later advised [the attorney] that both positions in his opinion letter were wrong,” according to a charging document filed by federal prosecutor Michael Berger.
“As a result of the improper conversion of Nimco, Gajwani did not pay taxes due and owing on the capital gains realized” from his Tesla stock investments in 2019.
