Tax Shelter Disclosure and Penalties: New Requirements, New Exposures

One of the primary weapons in the battle against tax shelters has been mandatory disclosure to the IRS. The American Jobs Creation Act of 2004 built on this approach by clarifying and making consistent the various disclosure requirements and strengthening penalties for non-disclosure. To uncover abusive transactions, Congress drew the boundaries of disclosure so broadly that even legitimate tax planning transactions are covered. To understand the dangers in the new rules, one must look at the broad range of transactions covered, the participants covered, and the harsh penalties for nondisclosure. - Transactions Covered. The disclosure requirements apply to six categories of reportable transactions. Although the Service has established angel lists excluding some transactions from the broad definitions, many clearly legitimate transactions still will have to be disclosed. - Participants Covered. The disclosure requirements apply to participants in the transaction and material advisors, which are also broadly defined terms. For example, an exempt organization that is an accommodation party in a reportable transaction is a participant, even though the exempt organization does not receive any tax benefits from the transaction. - Penalties. The Act added a new penalty for a taxpayer\u27s failure to disclose a reportable transaction. This penalty applies even if a court rejects the Service\u27s view of the tax treatment of the transaction. The Act also strengthened the accuracy-related penalty for underpayments. However, this penalty is imposed only if the Service successfully challenges the tax treatment of the transaction. The new tax shelter disclosure and list maintenance requirements are complex, with significant penalties for non-compliance. The IRS is likely to apply these penalties strictly and aggressively. Anyone involved in virtually any capacity in any substantial transaction will need to evaluate their exposure carefull

TEFRA-Partnership Refunds: Five Steps to Protect a Partner’s Rights

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established a unified procedure for determining the tax treatment of partnership items at the partnership level rather than the partner level. The TEFRA-partnership refund procedures differ from the refund claim procedures that apply to other taxpayers. For a TEFRA partnership, a refund claim is an administrative adjustment request (AAF) and a notice of deficiency is a notice of final partnership administrative adjustment (FPAA). Procedures for the assessment of additional tax attributable to partnership items have received much attention in recent years, but the procedures concerning refunds are complex and full of traps.The tax matters partner (TMP) plays a key role in protecting the partners’ rights, but the TMP’s interests may differ significantly from those of other partners. Because of potential conflicts of interest, an individual partner should not rely entirely on the TMP. This article recommends five steps a taxpayer should take to protect its rights in a TEFRA partnership.First, file an AAR before the IRS issues an FPAA; otherwise, it will be too late. Outside of the TEFRA-partnership context, taxpayers can simply default on a notice of deficiency, pay the resulting assessment, and then file a refund claim. With a TEFRA-partnership, the partners may no longer file an AAR after the IRS issues an FPAA so the only way to pursue a taxpayer-favorable adjustment on other issues is to contest the FPAA in court. Failing to do so will permanently forfeit any such favorable adjustments.Second, review the complex statute of limitations for AARs carefully. There are significant differences between the statute of limitations concerning refund claims and refund suits, outside the TEFRA-partnership context, and the statute of limitations for AARs and related judicial review. Assumptions based on other statutes of limitations could easily result in forfeiting claims. Third, file a separate AAR and do not rely entirely on the AAR filed by the TMP. Individual partners can always contest an FPAA in court, even if the TMP chooses not to, so their rights are protected. But if the IRS disallows an AAR filed by the TMP, only the TMP can file a petition for judicial review and redetermination. Individual partners should consider filing their own AAR and not relying on the TMP’s. The duplicative AAR will likely be rejected but would preserve the partner’s right to judicial review if the TMP’s AAR is disallowed and the TMP does not file a petition in Tax Court.Fourth, consider extending the partner-level statute of limitations for assessments to avoid forfeiting potential refund claims. If the TMP consents to an extension of the statute of limitation for the assessment of tax attributable to partnership items, that will extend the statute of limitations for filing an AAR. If the TMP has not extended the statute of limitations, and an individual partner needs more item to prepare an AAR, the partner may need to extend the partner-level statute of limitations.Fifth, if beyond the statute of limitations for an AAR, consider alternative methods of recovery. For example, the partner may request a discretionary adjustment by the IRS under Section 6230(d). In appropriate circumstances, a partner can seek to apply the statutory mitigation provisions or the judicial doctrine of equitable recoupment.The TEFRA procedures for AARs provide all partners a way to recover overpayments attributable to partnership items. The procedures are complex, however, with many potential pitfalls. Any partner who identifies a potential refund item for the partnership should thoroughly review all of the applicable requirements and carefully assess what it must do to preserve its rights. In particular, a partner may find it beneficial to file its own AAR, or include refund items in a petition for readjustment of an FPAA, in case the TMP cannot or will not act in the partner’s interests. Under some circumstances, it may even be appropriate for a partner to extend its own statute of limitations to protect its interests

Navigating TEFRA Partnership Audits in Multi-Tiered Entity Structures

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established a unified procedure for determining the tax treatment of partnership items at the partnership level rather than the partner level. Although these rules addressed a serious and real administrative problem in the assessment of partnership level deficiencies, they also created a complex process with many new problems and potential traps. One particularly unique set of challenges arises in the context of multi-tiered entities.Multi-tiered entities are partnerships that have a partnership or other pass-through entity as a partner. The pass-through partner is commonly referred to as a “tier,” and the partnership in which it holds its interest is the “source” partnership. The partners who hold an interest in the source partnership through a pass-through partner are “indirect partners” of the source partnership. TEFRA procedures apply to all partners, whether direct partners, pass-through partners, and indirect partners. Pass-through partners and indirect partners face unique issues in navigating the TEFRA rules. This article highlights some common issues.The Internal Revenue Service (IRS) provides notices of the beginning of an audit to the partnership and “notice partners,” generally those partners identified on the partnership’s return. Pass-through partners are required to pass the information along to their partners, but any partnership proceedings and adjustments apply to indirect partners even if they did not receive notice of the proceedings. Indirect partners therefore may wish to follow the special procedure to become notice partners and therefore receive notifications directly from the IRS. This may be particularly important if the pass-through partner is in bankruptcy or the indirect partner holds less than 1% interest in a large partnership. All partners have a right to participate in certain administrative proceedings. However, some rights are limited to notice partners, such as the right to file a protest to a notice of final partnership administrative adjustment (FPAA) or the right to file a petition for redetermination in Tax Court. Further, the tax matters partner (TMP) can reach a settlement with the IRS that binds all partners who are not notice partners, while notice partners can accept the settlement or not. Thus, indirect partners may wish to protect these rights by follow the special procedure to become notice partners.Finally, the statute of limitations for assessment of taxes attributable to partnership items is longer for “unidentified partners”; it does not expire until one year after the unidentified partner is identified to the IRS. Becoming a notice partner may therefore prevent an indefinite extension of the statute of limitations for indirect partners. This is particularly important if the indirect partner, whether knowingly or unknowingly, takes a position on its tax return that is inconsistent with the partnership’s return.In many ways, TEFRA reduced the procedural burden on partners by streamlining the process and reducing overall audit costs. In exchange for this benefit, TEFRA’s procedures in many cases shift the notice burden to pass-through partners and limit an indirect partner’s right to control the resolution of its tax liability. Pass-through partners and indirect partners should approach a TEFRA audit with caution. A pass-through partner should take care to comply with TEFRA’s notice requirements to avoid potential liability to its partners. Likewise, indirect partners should protect their rights to participate in partnership-level proceedings and to control the resolution of their own tax liability

Nutrition-Related Factors and the Progression of Metabolic Syndrome Characteristics over Time in Older Adults: Analysis of the TUDA Cohort

Metabolic syndrome (MetS) is associated with an increased risk of cardiovascular disease and type 2 diabetes mellitus by an estimated two- and five-fold, respectively. Nutrition intervention could help to prevent the progression of MetS and associated pathologies with age, but the precise dietary components and related factors are not well understood. Therefore, the aim of this study was to evaluate the role of nutrition-related factors in MetS as well as the progression of MetS and its components over a 7-year follow-up period in older adults. This investigation involved the secondary analysis of data from the North–South of Ireland Trinity-Ulster-Department of Agriculture (TUDA) study of community-dwelling older adults (≥60 y), which were sampled at baseline (2008–2012; n = 5186) and follow-up (2015–2018; n = 953). Participants were deemed to have MetS if they met at least three of the following criteria: waist circumference (≥102 cm for males, ≥88 cm for females); HDL cholesterol (<1.0 mmol/L for males, <1.3 mmol/L for females); triglycerides (≥1.7 mmol/L); blood pressure (systolic ≥ 130 and/or diastolic ≥ 85 mmHg); and HbA1c (≥39 mmol/mol). The prevalence of MetS increased with advancing age (67% at baseline vs. 74% at follow-up). The factors at baseline that were predictive of a higher MetS risk at follow-up included waist circumference (OR 1.04, 95% CI 1.00–1.08; p = 0.038) and triglycerides (OR 1.77, 95% CI 1.21–2.59; p = 0.003). In a detailed dietary analysis conducted at the follow-up time point, higher protein intake (g/kg body weight) was associated with a lower risk of MetS (OR 0.06, 95% CI 0.02–0.20; p < 0.001), abdominal obesity (OR 0.10, 95% CI 0.02–0.51; p = 0.006), and hypertension (OR 0.022, 95% CI 0.00–0.80; p = 0.037), and a higher MUFA intake (g/day) was associated with a lower risk of MetS (OR 0.88, 95% CI 0.78–1.00; p = 0.030). No other dietary factors were significantly associated with MetS. In terms of protein quality, participants with MetS compared to those without consumed fewer high-quality protein foods (p = 0.009) and consumed more low-quality protein foods (p < 0.001). Dietary intervention along with other strategies focusing on potentially modifiable risk factors may delay the progression of MetS in older adults. Efforts to enhance the quantity and quality of protein intake may be warranted to reduce MetS in certain at-risk groups

Computing Interest on Overpayments and Underpayments: How Difficult Can It Be? Very!

Taxpayers often assume that the difficult part of a tax dispute is resolving the tax liability and penalties, while interest computation is fairly straightforward. In the authors\u27 experience, however, interest determinations are as subject to controversy and prone to error as tax liability determinations. The Article explores some of the areas that taxpayers should review carefully in the process of finalizing interest computations. - Frequent Errors. The Article reviews twelve areas in which, even though the law is settled and the facts are usually clear, the Service\u27s interest computations frequently include mistakes. Taxpayers need to be aware of these provisions, gather the necessary facts to support their legal positions, and review interest computations carefully to make sure the Code is applied properly. - Disputed Issues. The Article also discusses five Code provisions for which the courts have not yet reached definitive interpretations. The Service has won some initial victories, but several taxpayers are continuing to litigate these issues under alternative theories or in different jurisdictions. The decision whether to pursue an issue, and the choice of the particular legal theory and strategy to use, will depend on a taxpayer\u27s particular facts and circumstances. At a minimum, taxpayers should carefully evaluate the issue so that a decision regarding a claim can be made before the statute of limitations expires. - Procedural Considerations. Finally, the Article discusses out a planning opportunity to maximize interest benefits, addresses statutes of limitations, and points out a potential problem from the interaction of interest computations with Tax Court Rule 155 computations. Just as it is rare for a large corporate tax audit to yield no change, it is equally unlikely the first evaluation of interest for a tax period will remain unchanged after careful scrutiny. It is always in the best interest of the taxpayer to review thoroughly the factual, computational, and legal basis for the interest computations presented. When the tax liability has been finally determined, the hard work of interest resolution has just begun

Addressing nutrient shortfalls in 1- to 5-year-old Irish children using diet modeling: development of a protocol for use in country-specific population health

BACKGROUND: Dietary habits formed in early childhood can track into later life with important impacts on health. Food-based dietary guidelines (FBDGs) may have a role in improving population health but are lacking for young children. OBJECTIVES: We aimed to establish a protocol for addressing nutrient shortfalls in 1- to 5-y-old children (12–60 mo) using diet modeling in a population-based sample. METHODS: Secondary analysis of 2010–2011 Irish National Pre-School Nutrition Survey data (n = 500) was conducted to identify typical food consumption patterns in 1- to 5-y-olds. Nutrient intakes were assessed against dietary reference values [European Food Safety Authority (EFSA) and Institute of Medicine (IOM)]. To address nutrient shortfalls using diet modeling, 4-d food patterns were developed to assess different milk-feeding scenarios (human milk, whole or low-fat cow milk, and fortified milks) within energy requirement ranges aligned with the WHO growth standards. FBDGs to address nutrient shortfalls were established based on 120 food patterns. RESULTS: Current mean dietary intakes for the majority of 1- to 5-y-olds failed to meet reference values (EFSA) for vitamin D (≤100%), vitamin E (≤88%), DHA (22:6n–3) + EPA (20:5n–3) (IOM; ≤82%), and fiber (≤63%), whereas free sugars intakes exceeded recommendations of <10% energy (E) for 48% of 1- to 3-y-olds and 75% of 4- to 5-y-olds. “Human milk + Cow milk” was the only milk-feeding scenario modeled that predicted sufficient DHA + EPA among 1- to 3-y-olds. Vitamin D shortfalls were not correctable in any milk-feeding scenario, even with supplementation (5 µg/d), apart from the “Follow-up Formula + Fortified drink” scenario in 1- to 3-y-olds (albeit free sugars intakes were estimated at 12%E compared with ≤5%E as provided by other scenarios). Iron and vitamin E shortfalls were most prevalent in scenarios for 1- to 3-y-olds at ≤25(th) growth percentile. CONCLUSIONS: Using WHO growth standards and international reference values, this study provides a protocol for addressing nutrient shortfalls among 1- to 5-y-olds, which could be applied in country-specific population health

Dairy intakes in older Irish adults and effects on vitamin micronutrient status: Data from the TUDA study

Consumption of dairy products has been associated with positive health outcomes including a lower risk of hypertension, improved bone health and a reduction in the risk of type 2 diabetes. The suggested dairy intake for health in older adults is three servings per day but recent analysis of the NHANES data for older adults reported 98% were not meeting these recommendations. No studies have investigated the consequences of such declines in the dairy intakes of Irish older adults and the subsequent effects on vitamin micronutrient status