Washington (March 3, 2003) -- The Treasury Department and the Internal Revenue Service have issued final regulations requiring taxpayers to disclose their participation in potentially abusive tax shelters, and requires promoters to register certain abusive transactions, and advisors to maintain lists of clients who have entered into these deals.

"By issuing final regulations, we are putting the promoters that sell questionable transactions and the taxpayers that participate in them on notice. We are increasing our efforts to identify and shut down abusive tax avoidance transactions as quickly as possible," said Treasury assistant secretary for tax policy Pam Olson.

"The final regulations improve the system by helping us get the information needed to identify questionable transactions and the taxpayers who have participated in them. Besides using the information to target enforcement resources better, the Treasury Department and the Internal Revenue Service will use this information to prepare guidance that advises taxpayers about transactions marketed to them that may not work as advertised."

These final regulations, effective for transactions after Feb. 28, 2003, conform to the taxpayer disclosure regulations and the promoter list-maintenance regulations so that the rules are easier to apply and administer. In addition, the final regulations reflect a number of changes intended to reduce unnecessary disclosure.

Taxpayers will be required to disclose and promoters will be require to maintain investor lists for six categories of transactions:

  • listed transactions (transactions that have been identified by the IRS as tax avoidance transactions);
  • transactions marketed under conditions of confidentiality;
  • transactions with contractual protection;
  • transactions generating a tax loss exceeding specified amounts;
  • transactions resulting in a book-tax difference exceeding $10 million; and
  • transactions generating a tax credit when the underlying asset is held for a brief period of time.

-- Electronic Accountant Newswire staff

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