The Internal Revenue Service Appeals Division has tightened the guidelines under which it will settle cases with taxpayers that participated in certain abusive transactions, the agency advised this week.
Under the new guidelines, the IRS will not settle unless taxpayers concede 100 percent of the claimed losses or deductions, reduced by only the amount of transaction costs up to 10 percent of the claimed losses or deductions. Taxpayers also must concede 50 percent of the accuracy-related penalty at issue. If both the 40 percent gross valuation misstatement penalty and the 20 percent substantial understatement penalty were asserted, then the settlement will apply to the gross valuation misstatement penalty, the IRS said.
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