The live Tax Talk Today Webcast addresses tax issues once a month, April excluded, is free to the viewing audience and qualifies for CPE. Past segments are accessible through the archive on www.taxtalktoday.tv. Regularly one-hour segments, Tuesday's Webcast was extended to two-hours to accomodate the depth and breadth of the topic.

"This is an issue (abusive tax shelters) that goes well beyond the corporate level, to the small business community, and even to some individual taxpayers,” remarked Pamela F. Olson, Assistant Secretary, Tax Policy, Department of the Treasury.

The panelists from the IRS, the Department of the Treasury and the Tax Executives Institute focused on Corporate–Owned Life Insurance (COLI), Section 351 contingent liability and Section 302/318 basis shifting. COLI shelter participants were offered a settlement that allows them to keep 20 percent of the benefits claimed. This offer is about to be discontinued. Participants in the shelter will be notified that they have 45 days in which to accept the settlement offer.

Section 351 contingent liability transactions create a double tax deduction; participants in this shelter have until Jan. 2, 2002, to apply for a settlement.  

In Section 302/318 basis shifting, shelters give taxpayers the chance to inflate the initial cost of stock. That enables them to obtain an artificially larger loss or smaller gain when the stock is sold.  People in these kinds of shelters have until Dec. 3, 2002, to settle on taxes, interest and penalties, and to avoid litigation. 

"Shelters have been needlessly diverting a lot of our energy," said Tim McCormally, Executive Director of Tax Executives Institute. "There’s a new balance now between the need to protect tax revenue, and the need to put these issues behind us." 

IRS representative Paul DeNard said the Large and Mid-Sized Business Division will be "devoting about 25 percent" of its resources to tax shelters in the coming year.

Panelists noted that in addition to seeking out shelter participants directly, the IRS is focusing on promoters of tax shelters to get taxpayers and corporations to come forward for settlement. The IRS is working with the promoters to shut down large tax shelters, saying there are billions of dollars and hundreds of taxpayers involved.

Roland Barral, Area Counsel, Financial Services, Large and Mid-Size Business Division, IRS, said the IRS wants to find a resolution to tax shelters, instead of just litigation. "We (IRS) recognize that there's a difference between valid tax planning and what we would call an abusive tax shelter transaction."

Access this program through the Tax Talk Today archive.

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