New IRS Rules Target Partnership Tax-Reduction Loophole

ARTICLE | October 22, 2024

Authored by Vasquez + Company

The IRS has launched a multistage initiative to close a tax loophole involving basis-shifting transactions used by partnerships to reduce taxable income. This article, "IRS Targets Partnership Tax-Reduction Tactic", explains the IRS’s concerns, proposed regulations, and how this crackdown may impact partnerships.

Key Points:

• Basis-Shifting Tactic: Partnerships leverage basis-shifting to reduce taxable income by reallocating tax basis to assets that generate deductions.
• IRS Actions: New proposed rules would curb basis-shifting, require reporting, and enforce penalties for noncompliance. Revenue Ruling 2024-14 declares certain transactions lacking economic substance as disallowed.
• Compliance and Penalties: The IRS now requires reporting for specific basis-shifting transactions exceeding $5 million, aiming to secure over $50 billion in revenue over the next decade.

The IRS’s intensified scrutiny on basis-shifting calls for careful compliance by partnerships to avoid penalties.

For more insights, read the full article here.

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