During the past decade, tax shelter investments were among the most controversial planning devices used by high-bracket taxpayers. United States Treasury officials have argued that the use of shelters causes an inequitable distribution of the tax burden and introduces "significant distortions into our economy," which "can have the effect of discouraging profitable and efficient enterprise." To halt widespread investment in "abusive" shelters, the Treasury has asked Congress to enact restrictive legislation; has issued revenue rulings to limit their use; and has begun a sophisticated tax shelter audit program. The most significant substantive limitations imposed on tax shelters were enacted in the 1976 Tax Reform Act and the 1978 Revenue Act, which limited the amount of paper losses investors may deduct and which revised the minimum tax on certain tax preference items. In addition, the Service since 1972 has issued rulings making it more difficult to organize a shelter around a limited partnership. The Service's other major device to limit tax shelter abuse has been its tax shelter audit program, which is the major focus of this Comment. Through this program the Service has channeled its efforts to locate abusive tax shelter schemes and to treat partner/investors uniformly in accordance with national standards. This Comment examines the organization of the program and the procedures followed to insure uniform and fair tax treatment. Consideration is also given to administration proposals to overhaul taxation of partnership tax shelters and to the congressional response to these proposals. Finally, current proposals to streamline the auditing procedures of tax shelter partnerships and the appeals process following the assessment of tax liability are examined.
Michael W. Homer,
Auditing Partnership Tax Shelters: IRS Procedures and Taxpayer Liability,
60 Neb. L. Rev.
Available at: https://digitalcommons.unl.edu/nlr/vol60/iss3/5