UBS CLIENTS CAUGHT IN BIG GAMBLE

With the US vs UBS case set to go to court in Miami on Monday, all of those 52,000 American clients --- whose names and tax information form the basis of the suit against the bank --- are caught in a big gamble. Those who have already "fessed" up to some tax avoidance/evasion scheme, are most likely taking advantage of the IRS tax amnesty put in place last March. It expires in September.

But those who haven't come forward, those Americans who are banking on Swiss secrecy to protect them from the IRS, may be taking a huge risk.

The tax amnesty provides for taxpayers who have not yet done to to:

File 6 years of back tax returns showing unreported foreign source income;

Calculate interest each year on unpaid tax;

Apply a 20% accuracy-related penalty or a 25% delinquency penalty;

Apply a 20% penalty based upon the highest balance of the account in the past six years.

In return for coming forward now, the IRS agrees to not pursue charges of criminal tax evasion and other fraud and filing penalties, which include fraud penalties (75% of the unpaid tax); and failure to file a TD F 90-22.1 (Report of Foreign Bank and Financial Accounts Report) which carries with it a penalty of $100,000 or 50% of the foreign account balance, whichever is more.

If UBS wins and does not turn over those 52,000 names, then those Americans are safe, at least for the time being. But if UBS settles or loses, the IRS has vowed to pursue everyone on the list, which means that the amnesty will no longer be in play.

It puts the burden on those who have not yet come forward to do so while the amnesty is an option. The upside is a chance to wipe the slate clean. The downside seems to be jailtime.