Tax Notes


TAX NOTES
The Treasury Department and the IRS request comments on a draft of a proposed Schedule M-3, Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More ( www.irs.gov/businesses/corporations/article/0,,id=119992,00.html ), for use by certain corporate taxpayers filing Form 1120, U.S. Corporation Income Tax Return. The new schedule would expand the current Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return, which the IRS last updated several decades ago. The department and service expect to release as final the new schedule for use with federal income tax returns for periods ending on or after December 31, 2004. Comments, which should be directed to Susan Blake at PFTG2@irs.gov , are due April 30.

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.

For single-click access to further coverage of the tax stories listed here, visit the Journal of Accountancy Web site at www.aicpa.org/pubs/jofa/joahome.htm .

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