Abusive Tax Shelters and Transactions
Form 13976, Itemized Statement Component of Advisee List (April 2008), may be used by material advisors for the purpose of preparing and maintaining lists with respect to reportable transactions under § 6112 of the Internal Revenue Code. The Form is not required to be used under § 301.6112-1 of the Procedure and Administration Regulations, but is offered as an option for maintaining the list.
Revenue Procedure 2008-20 provides guidance relating to the obligation of material advisors to prepare and maintain lists with respect to reportable transactions under § 6112 and provides that material advisors may use the Form 13976, “Itemized Statement Component of Advisee List” (or successor form) to maintain the itemized statement component of the list.
The Internal Revenue Service is taking steps to combat abusive tax shelters and transactions. A comprehensive strategy is in place to:
Identify and deter promoters of abusive tax transactions through audits, summons enforcement and targeted litigation.
Keep the public advised by publishing guidance on transactions and shelters that are determined to be abusive.
Promote disclosure by those who market and participate in abusive transactions.
Develop and implement alternative methods for resolving abusive transactions claimed by taxpayers.
Recent Tax Shelter Developments and Additions to This Site
Recently designated listed transaction:
Notice 2007-57 -- Loss Importation Transaction (IRB 2007-29)
Updated Mandatory IDR Attachment (03/31/2008)
New Tax Law Provisions Enacted to Combat Abusive Tax Shelters
The American Jobs Creation Act of 2004 (P.L. 108-357) was signed into law by the President on October 22, 2004. This new legislation contains many provisions that will affect abusive tax shelter promotions, advisors and investors.
Listed Abusive Tax Shelters and Transactions
IRS, the Office of Chief Counsel and Treasury issue formal guidance on certain tax avoidance transactions that are referred to as "listed transactions". Taxpayers are required to disclose their participation in listed transactions. To date, 30 listed transactions have been identified and addressed in formal guidance. Notice 2004-67 Updated Listed Transactions
Regulations on Abusive Tax Shelters and Transactions
Treasury regulations require that certain tax shelters and transactions be registered and that lists of investors be maintained by parties who organize or sell interests in the shelter(s). Investors in certain shelters and transactions are required to disclose their participation on their tax returns.
Mandatory Tax Shelter Information Document Request
The Abusive Tax Shelter Mandatory Information Document Request (IDR) is required for all LMSB return examinations and extends to examination activities that originate from post-filing as well as pre-filing activities such as the Compliance Assurance Program (CAP). This policy is part of LMSB's continuing commitment to the IRS initiative addressing abusive tax shelters.
LMSB Commissioner's memorandum authorizing Mandatory IDR (11/16/2006)
Offical Form 4564
Mandatory IDR Attachment (03/31/2008)
Tax Accrual Workpapers
IRS policy is to request tax accrual and other financial audit workpapers relating to the tax reserve for deferred tax liabilities, and to footnotes disclosing contingent tax liabilities appearing in audited financial statements.
IRS determines that FIN 48 Workpapers are TAW and subject to policy of restraint
Tax Accrual Workpapers Frequently Asked Questions - April 24, 2007
Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers (04/14/2005)
Interim Guidance Memo on Requesting Audit, Tax Accrual, and Tax Reconciliation Workpapers (07/09/2004)
IRM 4.10.20 - Requesting Audit, Tax Accrual, or Tax Reconciliation Workpapers
LMSB/SBSE Memorandum - 2002
Penalty Policy Relating to Abusive Transactions
An LMSB Commissioner Memorandum issued to LMSB executives, managers, and examiners provides guidance on consideration and application of penalties in an impartial, consistent and fair manner. A separate LMSB Commissioner Memorandum covers Penalty Policy in Disclosure Initiative Cases.
IRS Initiatives to Resolve and Identify Abusive Tax Shelters and Transactions
Taxpayers were afforded the opportunity to participate in a "Son-of-Boss" settlement initiative announced in May, 2004. Taxpayers who qualified for the offer paid outstanding tax, interest and applicable penalty.
IRS conducted a settlement initiative from October 2002 through March 2003 to allow taxpayers engaged in certain abusive transactions to resolve the tax consequences arising from their participation in the transactions. The transactions covered by the initiative were §302 / 318 Basis Shifting, §351 Contingent Liabilities, and Corporate Owned Life Insurance (COLI).
A prior Tax Shelter Disclosure Initiativeconducted from December 2001 to April 2002 resulted in 1,690 transaction disclosures from 1,212 taxpayers. The transactions disclosed involved $30 billion in claimed losses and deductions.
Announcement 2002-2, Disclosure Initiative
LMSB Commissioner Memorandum, Penalty Policy in Disclosure Initiative Cases
Office of Tax Shelter Analysis
The Office of Tax Shelter Analysis (OTSA) in the LMSB Division collects and analyzes information about abusive tax shelters and transactions, and coordinates LMSB’s tax shelter planning and operations.
Other Abusive Tax Schemes
In addition to the highly complex abusive technical transactions covered on this page, IRS is combating other types of abusive tax schemes, such as offshore tax avoidance schemes. Click here for information on steps IRS is taking to combat these other schemes:
Abusive Tax Avoidance Schemes
Employee Plans Abusive Tax Transactions