The Internal Revenue Service announced a limited opportunity for taxpayers to come forward and settle an array of transactions that the IRS considers abusive.
Taxpayers who participated in any of the 21 tax shelters identified by the IRS ( www.irs.gov/pub/irs-drop/a-05-80.pdf ) will have until Jan. 23, 2006, to submit settlement papers to the agency.
The initiative identifies 21 transactions that are eligible for the program -- including a wide cluster of schemes involving funds used for employee benefits, charitable remainder trusts, offsetting foreign currency option contracts, debt straddles, lease strips and certain abusive conservation easements. All eligible transactions carry the same settlement terms except the applicable penalty level.
"People entered into these deals often at the behest of lawyers and accountants peddling flaky tax products," said IRS Commissioner Mark W. Everson, in a statement. "Times have changed. The IRS has acted to shut down these deals, as has the Congress, in passing stiffer disclosure requirements and promoter penalties last fall. We're offering taxpayers a quick, quiet and cost-effective way to put these deals behind them."
The IRS has identified more than 4,000 taxpayers involved in any of the outlined transactions and continues to uncover additional participants through tax return examinations and the agency's promoter audit program. The transactions had been specifically marketed to wealthy individuals, large corporations and small business taxpayers.
Under the settlement terms, participants will be required to pay 100 percent of the taxes owed, interest and, depending on the transaction, either a quarter or a half of the penalty the IRS would normally seek. The program follows the fundamental terms of prior settlement initiatives, including those for Son of Boss transactions and schemes involving transfers by executives of stock options to family-controlled entities.
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