IRS: Castroneves owes millions in taxes

MIAMI -- The IRS says Brazilian race car driver and "Dancing With The Stars" winner Helio Castroneves owes more than $2.3 million in taxes.

The total, IRS agent Joann Levitt said, "is everything that should have been on the tax returns but wasn't."

Castroneves attorney David Garvin questioned whether Levitt had considered an alternative legal explanation for entries on the tax returns from 1999 to 2004.

"You made certain assumptions but you disregarded other evidence, isn't that right?" Garvin asked.

"I have rendered an opinion based on all of the evidence," Levitt said. "This was reportable by Helio Castroneves because it was his income."

The testimony by Levitt, the final prosecution witness, capped the fourth week of the trial. Castroneves, 33, his 35-year-old sister and business manager Katiucia, and Michigan lawyer Alan Miller, 71, each face more than six years in prison if convicted of conspiracy and tax evasion involving about $5.5 million in income.

Defense lawyers are expected to begin their case early next week but have not said whether Castroneves will testify. The two-time Indianapolis 500 winner has previously said he paid little attention to his financial affairs and relied on professionals to handle them.

In her testimony Friday, Levitt painstakingly went over the details of Castroneves' alleged tax evasion, which centers on a Panamanian entity called Seven Promotions that the IRS claims was secretly owned by the driver.

If it was, then U.S. taxes should have been paid on about $5 million in licensing payments for Castroneves from Penske Racing beginning in 2000. If it wasn't owned by Castroneves, he might have owed no tax, Levitt acknowledged.

"Helio Castroneves was the ultimate beneficiary of the accounts of Seven," she said.

Levitt said Castroneves also improperly claimed thousands of dollars in business deductions and failed to declare as income Hugo Boss clothing and airline tickets he received.

Ultimately, the Penske Racing payments were never made to Seven Promotions but were eventually deposited in a deferred income deal with a Dutch company. Yet under IRS rules, Levitt said Castroneves was liable for the tax even though he never actually received the money.

Castroneves' lawyers have repeatedly said the deferred income plan is legal and that he planned to pay his U.S. taxes when the account comes due in May of this year. The tax case does not involve his 2007 appearance on TV's "Dancing With The Stars," which made Castroneves an international celebrity.

As recently as one week ago there had been hope the trial would be in the hands of the jury by this weekend.

Castroneves' team is expected to take as long as two weeks, delving a bit deeper into its witness list than most around the trial had expected.

This slower pace all but ensures Castroneves will not be behind the wheel of Penske Racing's No. 3 car for the IndyCar Series season opener April 5 in St. Petersburg, Fla. Team officials have stated that they could put him in the car as late as Friday night, April 3, but his availability now looks all but impossible.

Australian Will Power is currently in the car as a substitute driver and was fastest during the two-day IndyCar Series test at the Barber Motorsports Park in Birmingham, Ala., earlier this week. Power finished eighth at St. Petersburg one year ago driving for KV Racing. Castroneves finished second.

Information from The Associated Press and ESPN The Magazine's Ryan McGee was used in this report.