The Wall Street Journal ($) is reporting today that the IRS intends to challenge transactions that KPMG structured to shift tax obligations improperly to tax-exempt organizations, including charities, and away from shareholders of certain types of closely held corporations. Earlier posts involving KPMG’s role in allegedly abusive tax shelters are here and here.
The strategy at issue is the same as a shelter that KPMG developed that was the subject of a critical Senate Permanent Subcommittee on Investigations public hearing in November. KPMG marketed the shelter as the “S-Corporation Charitable Contribution Strategy” — a/k/a “SC2.” By declaring such transactions to be abusive, the IRS is indicating that the transactions will probably be disallowed for tax purposes, and that participants could be held liable for unpaid taxes, interest and penalties.
Meanwhile, a Manhattan federal grand jury continues a criminal investigation into tax shelters that KPMG sold. KPMG says it is cooperating with criminal probe.