Daily Tax Update - February 14, 2005

Treasury, IRS "List" Service Contract Transactions

On February 11, the Treasury Department and the IRS issued Notice 2005-13 that designates "sale-leaseback" or service contract arrangements as abusive tax avoidance transactions. The "American Jobs Creation Act of 2004" enacted limitations on the deductibility of losses from future service contract transactions. 

  • The Notice informs taxpayers that the IRS will challenge the purported tax benefits claimed by taxpayers entering into earlier service contract transactions on a number of grounds. It further states that the transactions are considered "listed transactions."  Taxpayers who enter into service contract transactions and who are required to file tax returns must disclose their participation to the IRS.  In addition, promoters of listed transactions must keep lists of investors and, in certain cases, register those transactions with the IRS.
  • Senate Finance Committee Chairman Charles Grassley (R-IA) said, "I appreciate the Treasury Department’s effort to shut down these abusive deals. The department has done a very good job of going after bogus leasing shelters since the Finance Committee exposed them. Today’s action complements our new law going after these deals. It reaches back to the deals that otherwise might have gotten away.  This Treasury Department has been very active in attacking tax shelters, and I appreciate the support it’s given to the Finance Committee in our anti-shelter efforts.
  • For additional information, contact J. Walker Johnson via email.
  • The notice can be accessed here

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