Washington (July 6, 2004) — More than 1,500 taxpayers have admitted to purchasing a tax shelter strategy known as “Son of Boss” since the Internal Revenue Service announced a settlement initiative with lighter penalties for those who come forward voluntarily, the agency said.
The Son of BOSS strategy -- which evolved from the initial BOSS product (bond and option sales strategy) -- was aggressively marketed by a network of law firms, accounting firms and investment banks in the late 1990s and 2000 as a shelter for individuals who had received a large one-time capital gain. The IRS, which declared the transactions abusive in August 2000, estimates that the shelter has cost the government roughly $6 billion.
Under the IRS settlement guidelines, announced May 5, Son of Boss users will have to pay penalties of 10 percent to 20 percent. The deadline for taxpayers to elect to settle was June 21.
“By any measure, this is a strong response from taxpayers entangled in Son of Boss transactions,” said IRS commissioner Mark W. Everson, who noted that the agency has already begun to contact the taxpayers who didn’t take the IRS up on its offer.
IRS chief counsel Don Korb warned that the IRS plans an "aggressive litigation strategy" for people who take the cases to court.
The original BOSS shelter was closed down. Its offspring, Son of BOSS, shelters capital gains with paper tax losses from foreign currency options spread transactions, European digital foreign currency options investment transactions, or option partnership strategy transactions, according to Selva Ozelli, CPA, an international tax attorney with RIA, a Thomson business. Last year, the IRS issued regulations to combat the shelters and issued summonses to a number of accounting and law firms to disclose their clients involved in shelters marketed by the firms.
“Given the long stock market boom, companies and wealthy individuals sought to shelter their capital gains through paper losses, and Son of BOSS was one of the tax shelters that allowed them to do this. However, there may be other shelters lurking in the background that haven’t been identified yet," said Ozelli. "We’re likely to see more abusive tax shelters come to light through IRS’s continued enforcement actions.”
— Roger Russell
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