By
MARTIN A. SCHAINBAUM, ESQ.
Introduction
Time Magazine, in its March 5, 1984 issue, had on its front cover thefollowing: “That Monster Deficit: America’s Economic Black Hole”. The article in support of that headline stated in part: “… the sheer size of the budget gap is almost beyond comprehension. In its weekly newspaper, the American Bankers Association tried to put art $180 billion deficit into perspective by calculating that in order to spend a billion dollars, a shopper would have to use up one hundred dollars a minute for nineteen years. The President has used a similar metaphor. In a speech unveiling his economic program soon after he took office, Reagan dramatized his concern about the national debt, then approaching one trillion, by noting that it would take a stack of one thousand dollar bills sixty-seven miles high to equal that total. When he brought out his new budget this month, Reagan failed to mention that his deficit would push the debt to $1.8 trillion by next year and raise his stack of one thousand dollar bills to more than one hundred twenty miles.” To this dilemma, you must add the dilemma of the Internal Revenue Service in fighting a long frustrating battle with respect to tax shelters. Tax shelter cases represent approximately one billion dollars in tax liabilities and now make up more than a third of the Tax Court’s total caseload. Furthermore, the IRS estimates roughly that the Treasury loses annually approximately 3.6 billion dollars in revenue from the so-called “abusive” tax shelters. This circumstance in the economy of the United States resulted in some recent legislation which added to the Internal Revenue Code in 1981 the Economic Recovery Tax Act (ERTA) and in 1983 the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The 1981 legislation imposed certain stiff penalties aimed at relieving the compliance ills. These new penalties dealt with (1) substantial understatements of tax liability, (2) aiding and abetting understatements, (3) abusive tax shelters, and (4) frivolous returns.
Recently, the Commissioner of the Internal Revenue Service announced a “coordinated field attack to prevent tax abuse before it can occur”. To assist in preventing so-called tax shelter abuse, the Commissioner pointed to at least two Sections of the Internal Revenue Code, put in place by TEFRA, namely Code Section 6700, relating to the promoter penalty, and Code Section 7408, pertaining to enjoining a promoter from further involvement in a shelter activity. The Service also created a new weapon. This new weapon is a pre-filing notice, in letter form, sent to investors in the so-called “abusive” tax shelter, notifying them that, if they claim certain deductions or credits or other benefits associated with the shelter on their federal tax returns, their returns will be subjected to examination and the tax benefits claimed will be disallowed.
The Problem
The problem that the Service and taxpayers face is one where inflation and a growing level of personal income has resulted in taxpayers seeking to maximize the benefits granted by Congress in the Internal Revenue Code. The Service disagrees with the taxpayer’s aggressive use of tax benefit provisions which result in reducing the amount of revenue flowing into the Treasury. The result has been, in many instances, abusive tax shelters, which typically do not result in any economic benefit and have been created solely to evade taxes, with little or no expectation of positive financial income. However, there are, and the Service concedes, legitimate investments which yield appropriate tax benefits as granted by the Internal Revenue Code. Therefore, the problem that results is how to identify those tax shelters which are “abusive”; and what to do about such shelters once identified.
The Attack
Approximately ten years ago, the Service initiated a coordinated program emanating out of the national office to examine potentially abusive oil and gas industry schemes. Thereafter, the program was expanded to cover other “so-called tax shelters,” primarily in the areas of real estate, movies, and farming. Following up on this attack, the Service was able to gain legislation pertaining to “at risk”. This legislation turned out to be Section 465 of the Internal Revenue Code as added by the Tax Reform Act of 1976. Subsequently, the Service was able to add additional provisions through ERTA. such as the penalty for over-valuation, and an increased negligence penalty under Section 6653. To give the Service more punch, Congress enacted certain provisions as part of TEFRA, which materially aids the Service in its attempt to curb abusive tax shelters. The two most important new weapons in the arsenal of the IRS are Section 6700 and 7408. Section 6700 provides for a new civil penalty to be assessed against persons who promote abusive tax shelters. This penalty is aimed at the promoter. It became effective on September 4, 1982. In essence, the penalty provides as follows: in addition to other penalties provided by law, the penalty is equal to the greater of $1,000.00 or 10% of the gross income to be derived from the activity. If the amount to be derived cannot be ascertained, the Service may assess the penalty according to the current value of the portion of such gross income that can be determined. In calculating the penalty for the amounts still to be derived, the IRS may look only to unrealized amounts that may be reasonably expected to be realized. For the penalty to apply, reliance by the purchaser is not required. Nor is under-reporting of tax a prerequisite. Instead, the offering materials alone can form a legitimate basis for assessing the penalty.
Who is subject to the penalty? Persons subject to the penaltyincludethosewhoorganize or assist in organizing, or who participate in the sale of, an abusive tax shelter. Two types of conduct can lead to such a determination: false or fraudulent statements. The penalty will be imposed on any person who, in connection with the organization or sale of any interest to an entity, an investment plan or arrangement, or any other plan or arrangement makes or furnishes a statement that he/she knows or has reason to know is false or fraudulent as to a material matter with respect to any tax benefit available through participation in the investment. The other ground is based upon gross valuation overstatements. An individual can also be rendered liable for the penalty if, in connection with the organization or sale of an arrangement, he makes or furnishes a gross valuation overstatement as to any material matter. A matter is considered material if the investor places considerable significance on it in deciding whether to invest in the arrangement. A gross valuation statement is a statement of the value of property or services. If the value is directly related to the amount of any income tax deduction or credit available to an investor by reason of his participation in the arrangement, the stated value must, however, exceed 200% of the correct value. Nevertheless, if there is a showing that there was a reasonable basis for the valuation, in that it was made in good faith, the IRS may waive all or part of the penalty that is attributable to the gross valuation overstatement. In addition to the Section 6700 penalty, there is coupled another provision found at Section 7408 that allows a civil action to be brought at the request of the Treasury, seeking to prohibit a promoter of an abusive tax shelter from further involvement in the identified promotion, or in any other abusive shelter activity. Injunctive relief may be granted against any person found to be engaging in conduct subject to the promoter penalty where an injunction is appropriate to prevent further violations.
Present Shock
The Service will no longer wait until the tax benefits are claimed on filed returns. Instead, it has begun an immediate battle on the promoter and investors prior to filing tax returns. Here is how present shock becomes reality. First, the Service identifies what it considers an abusive shelter. It happens in this manner. A coordinator responsible for gathering information on shelters has been designated in each IRS district. This coordinator will rely primarily on leads obtained from federal, state and local information agencies, other IRS investigations, and magazines and newspapers to identify tax shelter promotions. Furthermore, it will also seek assistance from lawyers, accountants, and other tax professionals who may be aware of any abusive tax shelter promotions.
Once a potential tax shelter has been identified, a committee in each district will review the attributes of that potential abusive shelter to determine whether in fact there is a likelihood of abusive practices. This committee consists of representatives of the district counsel, the criminal investigation division and the examination division. The committee’s review will focus on past activities of the promoter, the type of shelter under consideration, the size of the promotion, the amount of the tax deductions, and other tax benefits claimed. Furthermore, it will also consider the degree of regional and national impact of such a shelter on the tax revenue. In addition, substantive, specific issues will be considered and any other factors that will be relevant in determining whether or not a particular shelter is abusive. If after this review, the committee determines that the promotion possibly involves tax abuses, the activity will be referred to a revenue agent for an examination under Section 6700. Moreover, a district counsel attorney will be assigned to aid the revenue agent in examining the particular shelter.
Once an investment has been so identified, the Service will notify the promoter that the shelter is the subject of an investigation that may lead to the imposition of the promoter penalty or the issuance of art injunction prohibiting further promotion of the shelter. In addition, the promoter will also be notified that the Service is considering sending a pre-filing notification letter to each investor. The IRS agent will then request a list of documents, books and records, that the promoter must produce within ten days or be faced with issuance of a summons. If after examination of the records, a decision is made that the shelter is abusive, the promoter will have an opportunity to try to convince the Service that an action under Section 6700 or 7408 is inappropriate. At this meeting, the promoter will present whatever evidence is available to persuade the IRS that no action is warranted. As part of the timing, the Service has a strict schedule and will not normally deviate from its administrative procedural level of examination. After the meeting with the promoter, the Service will consider on the basis of the agent’s and the attorney’s recommendations, whether or not to assert the Section 6700 penalty or whether to apply for injunctive relief against the promoter under Section 7408. If a pre-filing notice is to be issued to each investor, the district director must personally approve such a notice.
The cornerstone of the Service’s attack on tax shelters is Revenue Procedure 83-78, I.R.B. 1983-43,44. This revenue procedure, in addition to outlining the various steps, as previously discussed, at the administrative level, in determining whether or not a Section 6700 penalty should be imposed and whether a Section 7408 injunction proceeding should be commenced, also gives authority to the Service to issue a pie-filing notification letter. This is the most unique aspect of the new battle of the IRS against targeted tax shelter promotions. Under this approach, pre-filing letters are sent to investors in a targeted tax shelter. This notice advises such taxpayers that an IRS review of the promotion has indicated that it has generated certain tax benefits which the Service does not believe are allowable. Further, the notice points out that the return is subject to review by examination and that if the tax benefits are claimed, they will be disallowed and possibly the negligence penalty, or other penalties, such as overvaluation, and substantial understatement penalties will be asserted. Furthermore, this revenue procedure allows notification letters to be issued to investors who have already filed, advising them that they may file amended returns. Even if an amended return is filed, the Service may assert the appropriate penalties, based upon the taxpayer’s position on the original return. Among the factors the IRS will consider in deciding whether to issue pie-filing notices in a particular case include, among others, whether the shelter involves an overvaluation of assets, false or fraudulent statements, or the aberrational use of a technical position.
Future Shock
Once a shelter has been identified, examined, and the Service has made its recommendation, the Department of Justice becomes involved. Presently, the Department of Justice has pledged its full support to the IRS and has created a special litigation unit to work exclusively on promoter penalty and injunction cases and related summons activity. The Tax Division becomes involved when an examination of a promotion is concluded and there is a determination to seek an injunction under Section 7408. However, the Tax Division can be consulted earlier when a promoter has indicated a willingness to negotiate a consent decree. The Division’s Special Tax Shelter Unit handles any related summons enforcement actions that arise in connection with the Section 6700 penalty. In addition, the Tax Division, at its discretion, will offer a conference to permit the promoter in appropriate cases to negotiate a consent decree, but will not grant a conference merely to duplicate the conference held at the IRS district level. Entering a consent decree will not always require a promoter to permit allegations of tax abuse, but it will involve an agreement to refrain from or to take specific actions. A promoter, or his or her or its representative, should be aware that consent decrees could be fashioned in the following manner:
In addition to the injunction proceedings, a promoter could possibly be subjected to criminal prosecution. The Justice Department has indicated that an injunction action will not prejudice its review and recommendation for future criminal prosecution, should one be appropriate. Therefore, during the injunction litigation, the Justice Department will refrain, as a general policy, from even discussing any potential aspects of the conduct upon which the injunction is based. Consequently, the combination of the Internal Revenue Service and the Department of Justice policies may subject a promoter to a full range of civil penalties, injunction proceedings, as well as the future shock of criminal tax prosecution.
What Can Be Done?
In an early reported case, Mid-South Music Corporation, in the Tennessee District Court, 83-2 U.S.T.C. ¶9710(1983), the taxpayer failed in its initial attempt to prevent the IRS from issuing a pre-filing notification letter. However, the IRS did not succeed in obtaining an injunction. Presently, the case is on appeal2. The current effort by the Service and the Department of Justice requires that each practitioner be fully aware of the continuing and shifting sands in the Government’s battle against “abusiye tax shelters”. The whole area is taught with significant consequences to everyone involved. The consequences range from heavy civil penalties to the most severe destruction of a business and criminal prosecution. It is therefore necessary to be familiar with the penalty provisions as added by ERTA and TEFRA, as well as to know how the Service plans to apply Rev. Proc. 83-78, supra. The questions that need to be considered continuously are:
MARTIN A. SCHAINBAUM, ESQ.
Introduction
Time Magazine, in its March 5, 1984 issue, had on its front cover thefollowing: “That Monster Deficit: America’s Economic Black Hole”. The article in support of that headline stated in part: “… the sheer size of the budget gap is almost beyond comprehension. In its weekly newspaper, the American Bankers Association tried to put art $180 billion deficit into perspective by calculating that in order to spend a billion dollars, a shopper would have to use up one hundred dollars a minute for nineteen years. The President has used a similar metaphor. In a speech unveiling his economic program soon after he took office, Reagan dramatized his concern about the national debt, then approaching one trillion, by noting that it would take a stack of one thousand dollar bills sixty-seven miles high to equal that total. When he brought out his new budget this month, Reagan failed to mention that his deficit would push the debt to $1.8 trillion by next year and raise his stack of one thousand dollar bills to more than one hundred twenty miles.” To this dilemma, you must add the dilemma of the Internal Revenue Service in fighting a long frustrating battle with respect to tax shelters. Tax shelter cases represent approximately one billion dollars in tax liabilities and now make up more than a third of the Tax Court’s total caseload. Furthermore, the IRS estimates roughly that the Treasury loses annually approximately 3.6 billion dollars in revenue from the so-called “abusive” tax shelters. This circumstance in the economy of the United States resulted in some recent legislation which added to the Internal Revenue Code in 1981 the Economic Recovery Tax Act (ERTA) and in 1983 the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The 1981 legislation imposed certain stiff penalties aimed at relieving the compliance ills. These new penalties dealt with (1) substantial understatements of tax liability, (2) aiding and abetting understatements, (3) abusive tax shelters, and (4) frivolous returns.
Recently, the Commissioner of the Internal Revenue Service announced a “coordinated field attack to prevent tax abuse before it can occur”. To assist in preventing so-called tax shelter abuse, the Commissioner pointed to at least two Sections of the Internal Revenue Code, put in place by TEFRA, namely Code Section 6700, relating to the promoter penalty, and Code Section 7408, pertaining to enjoining a promoter from further involvement in a shelter activity. The Service also created a new weapon. This new weapon is a pre-filing notice, in letter form, sent to investors in the so-called “abusive” tax shelter, notifying them that, if they claim certain deductions or credits or other benefits associated with the shelter on their federal tax returns, their returns will be subjected to examination and the tax benefits claimed will be disallowed.
The Problem
The problem that the Service and taxpayers face is one where inflation and a growing level of personal income has resulted in taxpayers seeking to maximize the benefits granted by Congress in the Internal Revenue Code. The Service disagrees with the taxpayer’s aggressive use of tax benefit provisions which result in reducing the amount of revenue flowing into the Treasury. The result has been, in many instances, abusive tax shelters, which typically do not result in any economic benefit and have been created solely to evade taxes, with little or no expectation of positive financial income. However, there are, and the Service concedes, legitimate investments which yield appropriate tax benefits as granted by the Internal Revenue Code. Therefore, the problem that results is how to identify those tax shelters which are “abusive”; and what to do about such shelters once identified.
The Attack
Approximately ten years ago, the Service initiated a coordinated program emanating out of the national office to examine potentially abusive oil and gas industry schemes. Thereafter, the program was expanded to cover other “so-called tax shelters,” primarily in the areas of real estate, movies, and farming. Following up on this attack, the Service was able to gain legislation pertaining to “at risk”. This legislation turned out to be Section 465 of the Internal Revenue Code as added by the Tax Reform Act of 1976. Subsequently, the Service was able to add additional provisions through ERTA. such as the penalty for over-valuation, and an increased negligence penalty under Section 6653. To give the Service more punch, Congress enacted certain provisions as part of TEFRA, which materially aids the Service in its attempt to curb abusive tax shelters. The two most important new weapons in the arsenal of the IRS are Section 6700 and 7408. Section 6700 provides for a new civil penalty to be assessed against persons who promote abusive tax shelters. This penalty is aimed at the promoter. It became effective on September 4, 1982. In essence, the penalty provides as follows: in addition to other penalties provided by law, the penalty is equal to the greater of $1,000.00 or 10% of the gross income to be derived from the activity. If the amount to be derived cannot be ascertained, the Service may assess the penalty according to the current value of the portion of such gross income that can be determined. In calculating the penalty for the amounts still to be derived, the IRS may look only to unrealized amounts that may be reasonably expected to be realized. For the penalty to apply, reliance by the purchaser is not required. Nor is under-reporting of tax a prerequisite. Instead, the offering materials alone can form a legitimate basis for assessing the penalty.
Who is subject to the penalty? Persons subject to the penaltyincludethosewhoorganize or assist in organizing, or who participate in the sale of, an abusive tax shelter. Two types of conduct can lead to such a determination: false or fraudulent statements. The penalty will be imposed on any person who, in connection with the organization or sale of any interest to an entity, an investment plan or arrangement, or any other plan or arrangement makes or furnishes a statement that he/she knows or has reason to know is false or fraudulent as to a material matter with respect to any tax benefit available through participation in the investment. The other ground is based upon gross valuation overstatements. An individual can also be rendered liable for the penalty if, in connection with the organization or sale of an arrangement, he makes or furnishes a gross valuation overstatement as to any material matter. A matter is considered material if the investor places considerable significance on it in deciding whether to invest in the arrangement. A gross valuation statement is a statement of the value of property or services. If the value is directly related to the amount of any income tax deduction or credit available to an investor by reason of his participation in the arrangement, the stated value must, however, exceed 200% of the correct value. Nevertheless, if there is a showing that there was a reasonable basis for the valuation, in that it was made in good faith, the IRS may waive all or part of the penalty that is attributable to the gross valuation overstatement. In addition to the Section 6700 penalty, there is coupled another provision found at Section 7408 that allows a civil action to be brought at the request of the Treasury, seeking to prohibit a promoter of an abusive tax shelter from further involvement in the identified promotion, or in any other abusive shelter activity. Injunctive relief may be granted against any person found to be engaging in conduct subject to the promoter penalty where an injunction is appropriate to prevent further violations.
Present Shock
The Service will no longer wait until the tax benefits are claimed on filed returns. Instead, it has begun an immediate battle on the promoter and investors prior to filing tax returns. Here is how present shock becomes reality. First, the Service identifies what it considers an abusive shelter. It happens in this manner. A coordinator responsible for gathering information on shelters has been designated in each IRS district. This coordinator will rely primarily on leads obtained from federal, state and local information agencies, other IRS investigations, and magazines and newspapers to identify tax shelter promotions. Furthermore, it will also seek assistance from lawyers, accountants, and other tax professionals who may be aware of any abusive tax shelter promotions.
Once a potential tax shelter has been identified, a committee in each district will review the attributes of that potential abusive shelter to determine whether in fact there is a likelihood of abusive practices. This committee consists of representatives of the district counsel, the criminal investigation division and the examination division. The committee’s review will focus on past activities of the promoter, the type of shelter under consideration, the size of the promotion, the amount of the tax deductions, and other tax benefits claimed. Furthermore, it will also consider the degree of regional and national impact of such a shelter on the tax revenue. In addition, substantive, specific issues will be considered and any other factors that will be relevant in determining whether or not a particular shelter is abusive. If after this review, the committee determines that the promotion possibly involves tax abuses, the activity will be referred to a revenue agent for an examination under Section 6700. Moreover, a district counsel attorney will be assigned to aid the revenue agent in examining the particular shelter.
Once an investment has been so identified, the Service will notify the promoter that the shelter is the subject of an investigation that may lead to the imposition of the promoter penalty or the issuance of art injunction prohibiting further promotion of the shelter. In addition, the promoter will also be notified that the Service is considering sending a pre-filing notification letter to each investor. The IRS agent will then request a list of documents, books and records, that the promoter must produce within ten days or be faced with issuance of a summons. If after examination of the records, a decision is made that the shelter is abusive, the promoter will have an opportunity to try to convince the Service that an action under Section 6700 or 7408 is inappropriate. At this meeting, the promoter will present whatever evidence is available to persuade the IRS that no action is warranted. As part of the timing, the Service has a strict schedule and will not normally deviate from its administrative procedural level of examination. After the meeting with the promoter, the Service will consider on the basis of the agent’s and the attorney’s recommendations, whether or not to assert the Section 6700 penalty or whether to apply for injunctive relief against the promoter under Section 7408. If a pre-filing notice is to be issued to each investor, the district director must personally approve such a notice.
The cornerstone of the Service’s attack on tax shelters is Revenue Procedure 83-78, I.R.B. 1983-43,44. This revenue procedure, in addition to outlining the various steps, as previously discussed, at the administrative level, in determining whether or not a Section 6700 penalty should be imposed and whether a Section 7408 injunction proceeding should be commenced, also gives authority to the Service to issue a pie-filing notification letter. This is the most unique aspect of the new battle of the IRS against targeted tax shelter promotions. Under this approach, pre-filing letters are sent to investors in a targeted tax shelter. This notice advises such taxpayers that an IRS review of the promotion has indicated that it has generated certain tax benefits which the Service does not believe are allowable. Further, the notice points out that the return is subject to review by examination and that if the tax benefits are claimed, they will be disallowed and possibly the negligence penalty, or other penalties, such as overvaluation, and substantial understatement penalties will be asserted. Furthermore, this revenue procedure allows notification letters to be issued to investors who have already filed, advising them that they may file amended returns. Even if an amended return is filed, the Service may assert the appropriate penalties, based upon the taxpayer’s position on the original return. Among the factors the IRS will consider in deciding whether to issue pie-filing notices in a particular case include, among others, whether the shelter involves an overvaluation of assets, false or fraudulent statements, or the aberrational use of a technical position.
Future Shock
Once a shelter has been identified, examined, and the Service has made its recommendation, the Department of Justice becomes involved. Presently, the Department of Justice has pledged its full support to the IRS and has created a special litigation unit to work exclusively on promoter penalty and injunction cases and related summons activity. The Tax Division becomes involved when an examination of a promotion is concluded and there is a determination to seek an injunction under Section 7408. However, the Tax Division can be consulted earlier when a promoter has indicated a willingness to negotiate a consent decree. The Division’s Special Tax Shelter Unit handles any related summons enforcement actions that arise in connection with the Section 6700 penalty. In addition, the Tax Division, at its discretion, will offer a conference to permit the promoter in appropriate cases to negotiate a consent decree, but will not grant a conference merely to duplicate the conference held at the IRS district level. Entering a consent decree will not always require a promoter to permit allegations of tax abuse, but it will involve an agreement to refrain from or to take specific actions. A promoter, or his or her or its representative, should be aware that consent decrees could be fashioned in the following manner:
- An agreement to pay a specified amount of the promoter penalty (often immediate payment of the entire amount and not to deduct such payment on income tax returns);
- An agreement to refrain from specified types of conduct and also from the type of conduct generally prohibited by Code Section 6700;
- An agreement to give the IRS advance notice of any future tax shelter offerings, accompanied by copies of the offering materials;
- An agreement to provide a list of investors to the IRS containing names, addresses, and Social Security numbers; and
- Standard procedural safeguards:
- An admission of the Court’s jurisdiction and consent to venue,
- A waiver of the findings of fact and conclusions of law,
- A waiver of the right of appeal from the entry of decree,
- A waiver of the right to file for a refund of the penalty.
In addition to the injunction proceedings, a promoter could possibly be subjected to criminal prosecution. The Justice Department has indicated that an injunction action will not prejudice its review and recommendation for future criminal prosecution, should one be appropriate. Therefore, during the injunction litigation, the Justice Department will refrain, as a general policy, from even discussing any potential aspects of the conduct upon which the injunction is based. Consequently, the combination of the Internal Revenue Service and the Department of Justice policies may subject a promoter to a full range of civil penalties, injunction proceedings, as well as the future shock of criminal tax prosecution.
What Can Be Done?
In an early reported case, Mid-South Music Corporation, in the Tennessee District Court, 83-2 U.S.T.C. ¶9710(1983), the taxpayer failed in its initial attempt to prevent the IRS from issuing a pre-filing notification letter. However, the IRS did not succeed in obtaining an injunction. Presently, the case is on appeal2. The current effort by the Service and the Department of Justice requires that each practitioner be fully aware of the continuing and shifting sands in the Government’s battle against “abusiye tax shelters”. The whole area is taught with significant consequences to everyone involved. The consequences range from heavy civil penalties to the most severe destruction of a business and criminal prosecution. It is therefore necessary to be familiar with the penalty provisions as added by ERTA and TEFRA, as well as to know how the Service plans to apply Rev. Proc. 83-78, supra. The questions that need to be considered continuously are:
- What is an “abusive tax shelter”?
- Is there an authoritative definition on “abusive tax shelters”?
- What happens if the IRS defines a tax shelter as “abusive”?
- What to consider in representing promoters, investors or other taxpayers in handling an IRS tax shelter examination.
- What remedies are available to the taxpayer in combating an IRS examination under TEFRA Sections 6700 and 7408?
- What remedies are available to the IRS in its effort to shut down a “true” abusive tax shelter?
- Are any of the remedies illegal under the Constitution and existing laws of the United States?
- How does the District coordinating committee of the Service operate?
- Is the taxpayer exposing himself or herself or it to criminal prosecution from the very beginning of its tax shelter examination?
- How can the IRS prevent abuse in examining a tax shelter?
- What criteria will be applied to determine whether a case being examined under Sections 6700 and 7408 is criminal?
- When will such criteria be applied?
- Are taxpayers’ constitutional rights violated?
- What remedies are available to the IRS to prevent the claiming of deductions under an abusive tax shelter?
- What remedies are available to a taxpayer to prevent the IRS from issuing a pre-notification letter in circumstances where one may not be warranted?
- How does the Department of Justice plan to operate its Special Tax Shelter Unit?
- Under what circumstances can a taxpayer obtain a conference at the Department of Justice?
- If such a conference is obtained, will the Department use statements made at that conference to institute other civil proceedings or criminal action?
- What safeguards are available to the investor, promoter, and other taxpayers in a tax shelter examination?
- What rights, duties, privileges and powers are available to both the IRS and taxpayer in achieving a fair result with respect to its tax shelter examination and procedures as provided by the provisions of ERTA and TEFRA?