Tax Notes

The IRS adds to its Web site a section on abusive tax shelters, which unscrupulous promoters sometimes persuade employee retirement plan administrators to use ( www.irs.gov/retirement/article/ ). The new section enumerates several “listed transactions” involving plans the service says are the same as or substantially similar to others it has identified as tax-avoidance transactions. Examples of such shelters include accelerated 401(k) deductions, S corporation employee stock ownership plans improperly delaying the effective date of IRC section 409(p)’s nonallocation rules, collectively bargained welfare benefits under IRC section 419A(f)(5), certain trust arrangements seeking to qualify for exemption from IRC section 419, abusive Roth IRA transactions and deductions for excess life insurance in an IRC section 412(i) or other defined benefit plan.

The IRS in February began sharing with tax authorities in 45 states, the District of Columbia and New York City information on more than 20,000 taxpayers engaged in abusive practices ( www.irs.gov/newsroom/article/0,,id=120343,00.html ). By doing so the service continued a program begun in September 2003 under which the IRS and the states pool their resources to target abusive tax-avoidance transactions ( www.irs.gov/newsroom/article/0,,id=112866,00.html ). The shared data concern scams involving—among other things—offshore transactions, abusive trusts, employee leasing, home-based businesses and employment taxes.