abusive tax shelter

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Abusive tax shelter

A limited partnership that the IRS judges to be claiming tax deductions illegally.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Abusive Tax Shelter

An investment vehicle or other structure with no purpose other than to reduces one's tax liability. Often, an abusive tax shelter takes the form of a partnership or trust. Taxpayers caught using abusive tax shelters to avoid or evade taxation must pay the applicable taxes plus interest. To bypass accusation of arbitrary enforcement, the IRS publishes a list of investment vehicles that are considered abusive tax shelters, though one may face penalties for using a scheme that even resembles something on the list.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

abusive tax shelter

A tax shelter in which an improper interpretation of the law is used to produce tax benefits that are disproportionate to economic reality.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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You can, though, report the promoters of abusive tax shelters. If appropriate, you can forward promoter information to the IRS and FTB.
During the past five years, the Internal Revenue Service has taken steps to combat abusive tax shelters and transactions.
In October 2000, the IRS received information that the accounting firm BDO Seidman (BDO) was promoting potentially abusive tax shelters without complying with the listing and registration requirements of IRC sections 6111(a) and 6112(a).
In addition, he said the AICPA backs the service's major compliance initiatives related to abusive tax shelters, offshore credit card users, high-income nonfilers and unreported income and supports IRS efforts to reengineer its examination and collection efforts so that taxpayer audits focus on material issues.
An area of recurring controversy has been the increase in transactions that are potentially abusive tax shelters. Taxing authorities, courts, the AICPA, and other professional organizations have straggled with defining and regulating these transactions.
The 2005 settlement initiative (30) was offered to investors in 21 abusive tax shelters. It followed the basic terms of prior settlement initiatives including the son-of-boss transactions and the transfer by executives of stock options to family-controlled entities.
The memo serves as a reminder to tax professionals that the IRS is toughening up in its crackdown on questionable tax professional conduct, and comes on the heels of a bolstered OPR, revised Circular 230 and increased focus on abusive tax shelters.
There currently are 30 LTs that Treasury and the IRS have identified as abusive tax shelters in notices or other published guidance.
For several years Congress has challenged the AICPA to explain how its Code of Professional Conduct controls and disciplines members who are involved with abusive tax shelters. Concluding that there was a need for a comprehensive interpretation of member responsibilities that would apply across the spectrum of tax planning and include tax shelters (regardless of how that term is defined), the AICPA tax executive committee issued Interpretation no.
The IRS' main tactic to halt abusive tax shelters is to force disclosure of the promotion and use of shelters.
2498 that affect both clients and CPAs as practitioners, and that go beyond the problems associated with abusive tax shelters.
SB 1265, Laws 2005, imposes a 75% penalty for the failure to report listed transactions and a 50% penalty for the promotion of abusive tax shelters and also extends the statute of limitation (SOL) in several situations (including increasing the SOL from three to six years for failure to disclose a listed transaction) and provides that a deficiency assessment may be mailed to the taxpayer at any time if the deficiency is due to fraud or intentional evasion of the corporation tax law or its regulations.