NYSSCPA | The New York State Society of CPAs

NYSSCPA | The New York State Society of CPAs

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  1. Internal Revenue Service United States Department of the Treasury
    Internal Revenue Bulletin: 2007-45

    November 5, 2007

    Notice 2007-83

    Abusive Trust Arrangements Utilizing Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits

    Table of Contents

    BACKGROUND
    1. Promoted Arrangements
    2. Intent to Challenge Transactions
    LISTED TRANSACTIONS
    1. Transactions Identified As Listed Transactions
    2. Participation in the Listed Transactions
    3. Disclosure, List Maintenance, and Registration Requirements; Penalties; Other Considerations
    DRAFTING INFORMATION

    The Internal Revenue Service (IRS) and Treasury Department are aware of certain trust arrangements claiming to be welfare benefit funds and involving cash value life insurance policies that are being promoted to and used by taxpayers to improperly claim federal income and employment tax benefits. This notice informs taxpayers and their representatives that the tax benefits claimed for these arrangements are not allowable for federal tax purposes. This notice also alerts taxpayers and their representatives that these transactions are tax avoidance transactions and identifies certain transactions using trust arrangements involving cash value life insurance policies, and substantially similar transactions, as listed transactions for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations and §§ 6111 and 6112 of the Internal Revenue Code. This notice further alerts persons involved with these transactions of certain responsibilities that may arise from their involvement with these transactions.

    Concurrently with this notice, the IRS is publishing Rev. Rul. 2007-65 (concluding that for purposes of deductions allowable to an employer under § 419, a welfare benefit fund’s qualified direct cost does not include premium amounts for cash value life insurance policies paid by the fund, whenever the fund is directly or indirectly a beneficiary under the policy within the meaning of § 264(a)), and Notice 2007-84 (describing trust arrangements involving purported welfare be

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    Be Careful of Abusive 419(e) Welfare Benefit Plans
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    OCTOBER 22, 2007
    BY LANCE WALLACH AND RONALD H. SNYDER
    Life insurance agents and companies have always tried to find ways of making costs paid by business owners tax deductible. The situation became ridiculous a few years ago with outrageous claims about how Sections 419A(f)(5) and (6) of the Internal Revenue Code exempted employers from any tax-deduction limitations. Finally, the Internal Revenue Service put a stop to such egregious misrepresentations in 2002 by issuing regulations and naming such plans as "potentially abusive tax shelters" (or "listed transactions") that needed to be registered and disclosed to the IRS.

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