IRS 2023 Dirty Dozen – Scam #11 (Part B)

IRS 2023 Dirty Dozen – Scam #11:   The Internal Revenue Service cautioned taxpayers beware of promoters peddling bogus tax schemes aimed at reducing taxes or avoiding them altogether. (Part B)

These schemes can take many shapes, ranging from abusive deals involving syndicated conservation easements and micro-captive insurance arrangements. They can also involve an international component, such as hiding cash and digital assets offshore or using Maltese foreign individual retirement accounts or foreign captive insurance.

“These tax avoidance strategies often target high-income individuals seeking to reduce or eliminate their tax obligation,” said IRS Commissioner Danny Werfel. “Sometimes taxpayers are conned into believing they can participate in these schemes. People should always look for advice from an independent, trusted tax professional, not a promoter focused on aggressively marketing and pushing questionable transactions.”

Bogus tax avoidance strategies – Syndicated conservation easements

A conservation easement is a restriction on the use of real property. Generally, taxpayers may claim a charitable contribution deduction for the fair market value of a conservation easement transferred to a charity if the transfer meets the requirements of Internal Revenue Code section 170.

Syndicated conservation easements are arrangements that make the Dirty Dozen list again in 2023. In abusive arrangements, promoters are syndicating conservation easement transactions that purport to give an investor the opportunity to claim charitable contribution deductions and corresponding tax savings that significantly exceed the amount the investor invested. These abusive arrangements, which generate high fees for promoters, attempt to game the tax system with grossly inflated tax deductions.

As part of the Consolidated Appropriations Act of 2023, Congress amended section 170 to curb certain abusive conservation easement transactions. The IRS is committed to ensuring compliance with the conservation easement deduction law as amended in the 2023 legislation and will continue to scrutinize transactions that are “too good to be true.”

Next week  #12:  Schemes with international elements

(IRS Web Site)  (TTT 11/21/23)