As a weapon in their fight against tax shelters, the IRS has created something called "Transactions of Interest". In short they aren't saying these are illegal or bad, merely that the IRS will scrutinize such transactions.
Additionally if the taxpayer doesn't disclose their involvement in a Transaction of Interest, then they could be subject to some hefty fines.
During a recent tax luncheon, an IRS attorney was asked how long something could be considered a transaction of interest, the IRS attorney replied, "For a transaction of interest, we know there's something interesting going on here, but we may not have all the information."
I don't know about you, but that sounds awfully vague. Speaking of vague, someone then asked about if the IRS was ever going to issue some regulations on what exactly they meant by "substantially similar".
By way of background, when the IRS puts the world on notice that the IRS will consider a transaction s a tax shelter transaction, they always state that the described transaction and anything "substantially similar".
Thus the question about any guidance on what exactly is "substantially similar". I think you already know the answer to the question.
No further guidance will be coming from the IRS.
How exactly are people supposed to follow the rules when they are full of vague, amorphous concepts such as substantially similar and transactions of interest?
