Corporate tax managers should evaluate tax shelters
(and other tax strategies) from three perspectives: Will they stand up in court?
HF 138/SF 106, 2005 Special Session includes reporting and disclosure requirements for tax shelters
with one or more investors that are Minnesota taxpayers.
and foreign audit issues, partnership taxation, and tax shelter
The bills have generated significant controversy, especially over their wide-ranging definitions of a tax shelter
. The Senate Finance Committee's draft legislation defines the term "tax shelter
" as "any entity, plan, arrangement or transaction if a significant purpose of such entity, plan, arrangement or transaction is the avoidance or evasion of federal income tax."
Registration is required for confidential corporate tax shelters
offered for sale after February 28, 2000.
An examination of tax shelter
case law will reveal situations in which courts have held that a practitioner did not act with due diligence in ascertaining the facts.
Early May saw TEI provide comments to the Treasury Department and the IRS on Circular 230, which sets rules for lawyers, accountants, and others who "practice before the IRS." The regulations, which were issued last December, amend Circular 230's tax shelter
provisions effective June 20, 2005.
Tax professionals are now responsible to report, register and maintain investor lists for potentially abusive tax shelters
if they have:
Daugerdas earned more than $97 million as the architect of a two-decade fraud that relied on sophisticated tax shelters
to shield some of the country's richest people from paying taxes on nearly $8 billion in gains, said U.S.
In recent years, the IRS has enacted legislation to prevent the use of tax shelters
as vehicles that operate solely for the purpose of tax avoidance (see "abusive tax shelters
" below), but one of the key elements of tax shelter
partnerships prior to this legislative reform was the allocation of annual operating losses among the partners in such a manner that the investors seeking tax shelter
were allocated losses disproportionately greater than their true relative economic interest in the partnership.
While it agreed with the Tax Court that a House report could be a good record of congressional intent, it also found that in this case the report did not support Valero's position because nothing in it indicated that tax shelters
were limited to actively marketed tax shelters
or prepackaged products.
Valero further argued that the word "promotion" refers only to the peddling of prepackaged tax shelters
, as alluded to in Textron (100 AFTR2d 2007-5848, "Tax Matters: Work Product Stands Up to IRS Summons," JofA, Nov.