Loopholes are already being discussed by corporations, which always seem to be a step ahead of the Dept. of the Treasury and IRS. It is the little guys that get killed…. as the corporations play their games.
The U.S. Department of the Treasury and the IRS announced a plan to close a significant tax loophole exploited by large, complex partnerships, aiming to raise over $50 billion in tax revenue over the next decade. This plan focuses on “related party basis shifting,” a tactic where businesses operating through different legal entities trade the original purchase prices of assets to take more deductions or reduce future gains. This loophole has allowed wealthy taxpayers to avoid paying their fair share of taxes.
IRS Commissioner Danny Werfel highlighted the abuse of these tax shelters, which let affluent taxpayers evade their tax obligations. Following a year-long study of the basis-shifting issue, the Treasury and IRS intend to issue proposed regulations. Additionally, they released a revenue ruling on related-party partnership transactions involving basis shifting that lacks economic substance or substantial business purpose.
EYE ON YOUR MONEY: The IRS plans to end a major tax loophole for wealthy taxpayers that could raise more than $50 billion in revenue over the next decade.https://t.co/CkDfyZEKNp
— KUTV2news (@KUTV2News) June 17, 2024
This initiative is part of the IRS’s broader efforts to increase audits on the wealthiest taxpayers, large corporations, and complex partnerships. U.S. Secretary of the Treasury Janet Yellen emphasized that these proposed rules would enhance tax fairness and reduce the deficit. The increase in pass-through business filings with over $10 million in assets by 70% between 2010 and 2019, alongside a significant drop in audit rates for these partnerships from 3.8% to 0.1%, has contributed to an estimated $160 billion annual tax gap attributed to the top 1% of tax filers.
Warren laying out redlines for 2025 tax bill
-corporations must pay higher taxes
-A typical billionaire must pay a higher tax rate than a typical middle class family
-IRS has enough money to enforce the law. pic.twitter.com/P9HEVRIanf
— Emily Wilkins (@emrwilkins) June 17, 2024
The announcement follows closely on the heels of President Joe Biden’s economic advisor, Lael Brainard, outlining key principles for tax policy, including sustained funding for the IRS. Brainard stressed the importance of ensuring that ultra-wealthy taxpayers pay what they owe and adhere to the same rules as everyone else. This stance aligns with the President’s investment in the IRS, which has faced opposition from Republicans since Congress approved nearly $80 billion in funding through the Inflation Reduction Act.
IRS says closing asset loophole, abused by wealthy & some businesses, could add billions to tax collectionshttps://t.co/DTdhH8YqWw
— Shawn Peirce (@_silversmith) June 17, 2024
Key Points:
i. New Plan Announced: The U.S. Treasury and IRS introduced a plan to close a significant tax loophole used by large partnerships, aiming to raise over $50 billion in tax revenue over the next decade.
ii. Targeting Basis Shifting: The plan addresses “related party basis shifting,” a tactic where businesses trade original purchase prices on assets to maximize deductions or reduce future gains.
iii. Regulatory Action: Proposed regulations and a revenue ruling will be issued to curb basis shifting that lacks economic substance or substantial business purpose.
iv. Audit Focus: This initiative is part of broader efforts to increase audits on the wealthiest taxpayers, large corporations, and complex partnerships, addressing a $160 billion annual tax gap.
v. IRS Funding Debate: The announcement follows President Biden’s advisor emphasizing sustained IRS funding, amidst Republican opposition to the nearly $80 billion approved for the IRS through the Inflation Reduction Act.
Al Santana – Reprinted with permission of Whatfinger News
