IRS TO CHALLENGE CERTAIN S CORP AND EXEMPT ENTITY TRANSACTIONS: The Internal Revenue Service said that 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 declared that these abusive transactions are considered “listed transactions.” Participants in a listed transaction must disclose their participation, and promoters must keep lists of investors and, in certain cases, register the transactions with the IRS.
This notice is the first time that 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.
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