Washington (July 28, 2004) -- Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen. Max Baucus, ranking member, will revise their anti-tax shelter legislation to make sure several hundred taxpayers who used the "Son of Boss" tax shelter don't escape paying the taxes they owe.
"The Internal Revenue Service gave Son of Boss participants a chance to come forward voluntarily," Grassley said. "A large number of them didn't come forward. They're apparently hoping that the clock will run out on the statute of limitations, and they'll get off scot-free. That would be unfair, both to the Son of Boss users who came forward and to honest taxpayers who don't buy into these schemes."
Grassley and Baucus plan to revise provisions in the Senate-passed Jumpstart Our Business Strength Act to extend the Aug. 15 statute of limitations for Son of Boss investors who didn't participate in the IRS's voluntary settlement program. Also, they plan to revise the interest suspension rules for Son of Boss investors and other tax shelter investors.
"We intend to give the IRS adequate time to pursue those who rejected the terms of the voluntary settlement program," said Baucus.
Both the Boss and Son of Boss shelters were structured using derivatives, noted Selva Ozelli, CPA, an international tax attorney with RIA, a Thomson business.
“Derivatives are used in tax shelter transactions because of their uncertain tax treatment, limited financial statement disclosure and uncertainty regarding their valuation," said Ozelli. "The IRS is combating this problem from several different angles. First, they’ve closed down specific derivative-based tax shelters such as Son of Boss. Second, they’ve issued proposed regulations that clarify the timing of income, gain, loss and deductions for swaps and other notional principal contracts. Third, they’re gathering information to issue guidance on tax treatment of credit default swaps.”
-- Roger Russell
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