Anatomy of a Tax Shelter: They Called IRS ‘Too Stupid’ to Notice

The monthly agendas were packed with tedious tax issues, but the vibe was undeniably smug.

For more than a year, wealth management advisers gathered online to hash out strategies to defend wealthy Americans stashing billions in Maltese individual retirement arrangements. The offshore tax shelters purportedly permitted millionaires and billionaires to deposit their riches in retirement accounts without the limits and tax consequences found in domestic IRAs.

The recent arrival of auditors from the Internal Revenue Service was treated as a petty annoyance. Even a discussion of the IRS’s new funding to crack down on abusive tax schemes turned into trash ...