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FROM THE OFFICE OF PUBLIC AFFAIRS
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JS-978Today the Treasury Department and the Internal Revenue Service withdrew proposed regulations issued on December 27, 1996, relating to the treatment of obligation-shiftingtransactions, including lease-stripping transactions. The regulations provided complex rules for insuring that the income from the transactions was accounted for properly.
Since the proposed regulations were issued in 1996, the IRS has won two court cases that have upheld the disallowance of tax benefits from lease strip transactions. In view of the IRS's victories in these cases, we have concluded that the regulations are unnecessary to ensure proper accounting and that the complexity of the proposed regulations outweighs the potential benefit,stated Assistant Secretary for Tax Policy Pam Olson. Notice 2003-55 identifies lease strips as a listed transaction. The IRS will continue to challenge the purported tax benefit claimed by a taxpayer from a lease-stripping or similar transaction.
The text of REG-209817-96 is attached.
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