IRS DENIES PRE-EXISTING SILO BENEFITS: The Internal Revenue Service has designated "sale-in/lease-out" or "Silo" arrangements as abusive tax avoidance transactions.Silo arrangements are designed to exploit the tax law by shifting tax benefits from a tax-indifferent party that cannot use them to a taxpayer that can. Taxpayers entering into Silo arrangements cannot claim tax benefits as the purported owners of property subject to the lease, because they do not acquire tax ownership of the property.

In the American Jobs Creation Act of 2004, Congress enacted limitations on the deductibility of losses from future Silo transactions. In Notice 2005-13, the IRS says that it will challenge the purported tax benefits claimed by taxpayers entering into earlier Silo transactions. It further states that it will consider Silos to be "listed transactions," requiring those who enter into them to disclose their participation. In addition, promoters of listed transactions must keep lists of investors and, in certain cases, register those transactions with the IRS.

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