Washington (Nov. 21, 2003) -- The Treasury Department and the Internal Revenue Service issued a notice and temporary regulations to prevent the use of trusts to accelerate deductions for liabilities that a taxpayer is contesting. The use of a trust to improperly accelerate deductions under Tax Code Section 461(f) is now a "listed transaction." A taxpayer using a trust for this purpose will have to disclose it to the IRS, and an advisor promoting its use will be required to keep a list of taxpayers.
"The notice and regulations are part of our continuing efforts to identify and shut down abusive tax avoidance transactions," stated Treasury Assistant Secretary for Tax Policy Pam Olson. "Once again, we have put taxpayers on notice. A taxpayer that uses improperly a trust to accelerate a deduction for a contested liability will have to disclose that to the IRS."
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