Elian Trust Fund May Owe Over $90,000 To The IRS

By Jim Burns | July 7, 2008 | 8:27 PM EDT

(CNSNews.com) - A trust fund set up to help family members of Elian Gonzalez pay for legal representation during their battle to keep him in the U.S. could owe as much as $92,000 in income taxes to the Internal Revenue Service. The seven-month legal battle ended when Elian was allowed to return to Cuba with his father.

Stanton Levin, a Coral Gables, Florida tax attorney who is the fund's legal advisor, said the fund does not owe the IRS any money. Levin, along with the fund's three trustees are hoping to persuade the IRS not to tax the trust.

"We are paying into the IRS to avoid the potential of a tax and avoid interest and penalties. The (tax) return is not due until April 15th (2001)," Levin said.

The fund was created last March at the Ocean Bank in Miami to help pay the expenses of the team of attorneys that was involved in the seven-month custody battle over Elian.

"What has been paid out is for expenses incurred. They had to travel to Washington and Atlanta. They had filing fees and investigators. They paid funds from their own pockets. The purpose of this fund was to reimburse those attorneys for those costs. No attorneys got paid, they didn't even ask for payment," Levin said.

The tax problem stems from the interpretation of the "true intent" of those who made the donations, ranging from $1 to $10,000.

Among the donors were Florida sugar magnates Alfy and Pepe Fanjul, who donated $10,000 and Miami-Dade Mayor Alex Penelas, who gave $1,000 from his campaign funds.

"It's an unusual situation," Levin said, "it's very unusual because there are very few legal defense funds and the closest thing we can compare ours to is the Clinton Legal Defense fund. There's really no precedent that we could find that gave us any guidance."

In that case, the Clintons may have to pay taxes on the $11 million collected on their behalf to pay for their legal fees during the Paula Jones sexual harassment lawsuit, impeachment, the investigation of the Clintons' Whitewater real estate dealings in Arkansas and other matters.

Levin hopes to convince the IRS that the money to the Elian Defense Trust Fund was a gift and nontaxable.

"There is no way we can look at a donor's heart. We think there is a better than 50-50 chance that the IRS will decide the donations are gifts," Levin said.

When asked to comment on the case, the IRS in Washington, according to a spokesman said "federal disclosure laws" prevented the agency from commenting on "individual tax cases."