DONALD L. KORB
CHIEF COUNSEL FOR THE INTERNAL REVENUE SERVICE
REMARKS AT THE 2005 UNIVERSITY OF SOUTHERN CALIFORNIA
TAX INSTITUTE
THE ECONOMIC SUBSTANCE DOCTRINE
IN THE CURRENT TAX SHELTER ENVIRONMENT
LOS ANGELES, CALIFORNIA
ON
JANUARY 25, 2005
Introduction
As I’m sure all of you are aware, one of the most serious problems that the IRS
has had to face over the past 10 years is the proliferation of abusive tax shelters. While
the IRS and tax practitioners may not always agree on whether a particular transaction
constitutes an abusive tax shelter, there is a consensus, I believe, at least among
responsible tax practitioners, that the IRS must strive to identify and challenge those tax
shelter transactions that are used by taxpayers to inappropriately avoid paying taxes.
By now, you should have received your Form 1040 package for 2004 in the mail.
When you look at it, you will see that the package includes a letter from Commissioner
Everson, in which he sets forth our working equation at the IRS -- “Service plus
Enforcement equals Compliance.”
In the category of “Service” -- or, in the Commissioner’s words, “helping people
understand their federal tax obligations and facilitating their participation in the tax
system” -- I would highlight from the Office of Chief Counsel’s perspective, its
commitment to issuing not only a significant amount of published guidance but also
making sure that the regulations and rulings we issue provide rules that are clear and
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precise. For example, in the context of tax shelters, we have published rules regarding
the disclosure of reportable transactions which, we believe, were successfully designed
to balance the Service’s need to identify questionable transactions with the tax policy
goal of limiting the impact of the rules on routine business transactions. In addition,
over the past several years, we have identified approximately 30 transactions as so-
called “listed transactions” – these are transactions that the IRS and