(Uses of Artificially Inflated Basis in the Partnership Setting)
Notice 2000-44

 

 

If you believe that you may have engaged in a transaction that is the same or substantially similar to the transaction described above, Federal law may require you to disclose your and other parties’ participation in any such “listed transaction” on IRS Form 8886.

Special IRS Settlement Offer (Expired: 6/21/2004)
Son-of-Boss Participants

On May 5, 2004, the IRS announced that taxpayers who invested in these type of transactions had until June 21, 2004 to accept an IRS settlement offer to resolve their tax issues. Under the terms of this settlement offer, eligible taxpayers had to concede 100% of the claimed tax losses, plus pay all applicable interest and accept imposition of a penalty (unless they had previously disclosed their participation in the transaction). However, these taxpayers will be allowed to deduct as a loss their out-of-pocket transaction costs (i.e., promoter and professional fees).

The IRS further announced that taxpayers not participating in the settlement should expect to receive a statutory notice of deficiency (called a “90-day letter”) disallowing all losses and out-of-pocket costs, and asserting the maximum level of penalties. The IRS states that in order to achieve uniformity and enhance overall compliance with the tax laws, taxpayers will not be afforded traditional administrative appeals rights, by and through the IRS Appeals Office. Commissioner Mark W. Everson states that the IRS is “taking this unusual step because of the severity of the abuse.” IRS Chief Counsel Donald Korb added that “(t)axpayers should not expect to settle court cases on terms more favorably than those offered in the IRS settlement initiative.” See IR-2004-64 (May 5, 2004, (www.irs.gov/newsroom).

If you were a participant in the Son-of-Boss transaction, you need to be aware of your legal rights and disclosure obligations. You are well-advised to consult with a tax law litigation specialist familiar with the most current developments in the law concerning abusive tax shelter litigation (including, if applicable, TEFRA (for entities and their members treated for federal tax law purposes as partnerships)). If you have any questions about the IRS settlement initiative or this particular transaction, you may contact us.