What is the “Abusive Use of Partnerships” and Why does the IRS Care?
What is now considered as the “abusive use of partnerships,” and why would this matter to the IRS? The agency recently released IR-2024-166 , which is intended to provide “new guidance to stop partnerships from using sophisticated tax-free transactions that lack economic substance” to avoid paying taxes. The IRS continues to focus on and analyze the actions, behaviors, and strategies of high-income U.S. taxpayers to avoid paying the taxes they should owe each year. The IRS was the beneficiary of $80 billion in new funding from the Inflation Reduction Act (2022). Some of those new funds have been used to establish a new internal IRS team that will focus specifically on closing apparent “tax loopholes” while establishing new guidelines for high-income U.S. taxpayers. IRS audit teams have been focused on a multi-billion dollar scheme and the use of deductions generated through sophisticated partnership transactions. The agency’s publication referred to a new focus on “Basis shifting”...