Washington (June 24, 2003) -- For the first time, a law firm is being summoned to discover taxpayers involved in potentially abusive tax avoidance transactions.
The Internal Revenue Service has received approval from the U.S. District Court, Northern District of Illinois, to serve a John Doe summons on Jenkens & Gilchrist. The summons asks the law firm to identify taxpayers who may have invested in listed transactions or other potentially abusive transactions organized or sold by the firm's Chicago office.
"Our efforts to curb potentially abusive tax avoidance transactions depends on our ability to obtain and use a web of information about these transactions and those who invest in and promote them," said IRS chief counsel B. John Williams. "As part of our efforts, we have, and will, issue summonses to law firms, accounting firms, investment banks and others who may have been involved in the promotion of questionable transactions."
The key features of a John Doe summons are that the IRS must seek court approval to serve it and, if there are objections to the summons, the statute of limitations for assessing tax deficiencies for the unknown parties--the "John Does," in this case, the investors--is automatically suspended beginning six months after the service of the summons, while objections to the summons are resolved.
-- WebCPA staff
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