Advisors and clients doing asset protection and tax planning are urged to avoid any involvement in Distressed Asset Trust transactions. Failure to do so can result in heavy fines. All advisors are being warned that these types of transactions should be avoided and no client should engage in these transactions.
Distressed Asset Trust Transaction: Asset Protection & Tax Scam Warnings
Estate Street Partners wants to take a moment to advise newsletter members and the American people of a concerning topic. This advisory is in regards to transactions and scams or devises that may pose a threat to advisors, their practice, their clients and anyone else. Be aware to avoid any listed IRS transactions, illegitimate transactions or schemes, or asset protection crooked dealings. Estate Street Partners is here to assist advisors and the general public from staying away from these schemes. One such scheme is called the Distressed Asset Trust transaction. If an advisor or client is involved in a Distressed Asset Trust transaction, they could face fines up to $100,000 for natural persons or $200,000 in other cases.
A notice was issued by the IRS, known as Notice 2008-34. This notice is an effort to prevent the transference of any built-in loss that is a result of a tax neutral entity (business or individual) to a taxpayer of the U.S. who has not endured a financial loss. The Distressed Asset Trust transactions is a listed transactions by the IRS and advises tax-paying residents to avoid this scam, otherwise, penalties will be issued.
Before October 23, 2004, the following listed Distressed Asset Trust variations below were incorrectly adopted by the taxpayers who employed partnerships: The American Jobs Creation Act of 2004, Public Law 108-357 (118 Stat. 1418) (AJCA), amended § 704, 734 and 743 which became into effect following October 22, 2004. This was for:
- All contributions of built-in loss property to any partnership
- For basis adjustment regulations in the situation of a dispersion for which the basis reduction is significant
- For basis adjustment regulations in the situation of a relocation of a partnership interest for which the built-in loss is significant.
The amendments to § 704, 734 and 743 states that a built-in loss could be used by the contributing partner only and the basis adjustment rules are enforced in any situation with a significant basis reduction or built-in loss that is significant. Read IRS Notice 2008-34.
The IRS notice is currently issuing warnings stating that employing the Distressed Asset Trust transactions to maneuver the American Job Creation Act is deemed a listed transaction of tax avoidance transactions. Estate Street Partners is also warning all advisors and clients to avoid this type of transaction at all costs.
