A Seattle real estate owner worth an estimated $43 million routed $4.7 million of rental income through two shell companies that had been inactive since 1999, kept it off his returns, and hid it from his own tax preparer. Tax attorney Jason Carr breaks down how IRS-CI proved it, the exact line between a civil tax problem and felony evasion, and what Steven Loo should have done before the criminal investigator ever knocked.
Show Notes:
Steven T. Loo had every advantage: eight commercial properties across Washington and California, a stack of LLCs, and a net worth prosecutors pegged at around $43 million. What he didn’t have was any intention of paying his taxes. For years, Loo directed his property managers to send building profits into two bank accounts held by shell companies that had been dormant since 1999, spent the money on himself and his family, and never reported it. He didn’t even tell his tax preparer the income existed. Viewed across two decades, his returns claimed he owed nothing and sometimes claimed a refund.
A federal jury convicted Loo of six counts of tax evasion and six counts of filing false returns. In July 2026 he was sentenced to 20 months in prison, a $250,000 fine, and three years of supervised release, after prosecutors sought 51 months and called his motive simple greed.
In this episode, Jason Carr explains the affirmative-act rule that separates a civil audit from a felony under IRC § 7201, why filing a false return under § 7206(1) is its own crime, and how IRS Criminal Investigation used property-management records, bank records, and the preparer’s own testimony to close the “honest mistake” door. He also walks through the fork in the road every taxpayer faces when a criminal investigator shows up, and the voluntary-disclosure and compliance path that could have kept this an IRS matter instead of a DOJ case.
Key Takeaways
- Owing tax is civil. Building a structure to hide income is what makes it criminal. Concealment is the line.
- Routing income through shell companies or inactive entities is a classic “affirmative act” of evasion under Spies v. United States.
- Hiding income from your own tax preparer destroys the “my accountant did it” defense and helps prove willfulness.
- IRS-CI builds these cases on paper: third-party property records, bank flows, and the gap between income earned and income reported.
- When a criminal investigator knocks, improvising an explanation creates new evidence. Get counsel and protect privilege.
- If prior years are wrong, voluntary disclosure and amended returns through counsel beat waiting to be caught, especially when you can afford to pay.
Resources Mentioned
DOJ / U.S. Attorney’s Office, W.D. Wash., “Seattle real estate investor sentenced to 20 months in prison for $4.7 million tax evasion scheme” (July 17, 2026): https://www.justice.gov/usao-wdwa/pr/seattle-real-estate-investor-sentenced-20-months-prison-47-million-tax-evasion-scheme
United States v. Loo, No. 2:24-cr-00072 (W.D. Wash.) — indictment returned April 24, 2024.5
26 U.S.C. § 7201 — Attempt to evade or defeat tax (felony evasion).
26 U.S.C. § 7206(1) — Fraud and false statements / filing a false return.
Spies v. United States, 317 U.S. 492 (1943) — felony evasion requires an affirmative act of concealment, not mere failure to file or pay: https://supreme.justia.com/cases/federal/us/317/492/
Cheek v. United States, 498 U.S. 192 (1991) — willfulness and the limits of a good-faith defense: https://supreme.justia.com/cases/federal/us/498/192/
The Law Office of Jason Carr, PLLC: https://carrtaxlaw.com