Revised Corporate Tax Shelter Discussion Draft
February 14, 2001

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I. Section 6662A: Penalty for Participation in an Abusive Tax Shelter Device

2. Minimum Tax Reduction Thresholds

   As stated above, we applaud the staffs’ decision not to limit application of the tax shelter legislation to transactions in which a "large corporation" participates. However, we continue to believe that the threshold for application of the enhanced penalty should be based on the dollar size of the tax benefits produced by the transaction. Specifically, we believe that there should be minimum tax reduction thresholds for the application of the enhanced penalty in the case of an abusive tax shelter device that meets our proposed three-prong test set forth above, as follows:
    

   • Individual taxpayers: $100,000 tax liability reduction in one year or $200,000 over multiple years.
      
   • Corporate taxpayers: $250,000 tax liability reduction in one year or $500,000 over multiple years.

   The staffs could look to the new corporate tax shelter disclosure regulations (Temp. Treas. Reg. § 1.6011-4T(b)(4)) for guidance. We do not, however, believe that minimum tax reduction thresholds are necessary in the case of abusive tax shelter devices that are "listed transactions." In that case, we support the automatic application of the enhanced penalty.

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