Washington (April 6, 2004) -- The Internal Revenue Service says it intends to challenge certain transactions involving S corporations and tax-exempt entities, such as charities, that improperly shift taxation away from S corporation shareholders.|


In Notice 2004-30, the IRS declares that these abusive transactions are considered "listed transactions." Participants in a listed transaction must disclose their participation to the IRS, and promoters must keep lists of investors and, in certain cases, register the transactions with the IRS.


This notice is the first time the IRS has exercised its authority under the tax shelter regulations to specifically designate a tax-exempt party as a "participant" in a tax avoidance transaction.


"The participation of tax-exempt entities in these abusive transactions is a worrisome trend," said IRS Commissioner Mark W. Everson. "We are acting today to ensure the integrity of our charities."


The IRS says it will amend Form 8886, Reportable Transaction Disclosure Statement, to require parties filing the form to identify the names of all parties to a listed transaction, including any tax-exempt parties that facilitate the transaction.


-- WebCPA staff

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