The U.S. Treasury and IRS are closing a significant tax loophole used by wealthy individuals and partnerships, aiming to prevent tax avoidance through “basis shifting” tactics and potentially increasing government revenue by $50 billion over the next decade.
U.S. Treasury and IRS Target “Basis Shifting” Tax Tactics to Enhance Fairness and Increase Revenue
According to the International Business Times, the U.S. Treasury and IRS are teaming up to close a big tax loophole used by complex partnerships to lower their taxes. This loophole, known as “basis shifting,” allows related parties to manipulate deductions on assets to reduce how much tax they owe. IRS Commissioner Danny Werfel said these tactics let wealthy taxpayers avoid paying what they should.
Treasury Secretary Janet Yellen highlighted that new rules are aimed at fairness in taxes and reducing the federal deficit. They come after a thorough study and a new ruling on “basis shifting” transactions that lack a real economic purpose. Deputy Treasury Secretary Wally Adeyemo added that stopping these practices could bring in an extra $5 billion in taxes each year, totaling around $50 billion over ten years.
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$50 Billion in Lost Revenue: Treasury Targets Tax Loophole for High-Net-Worth Individuals and Partnerships (PHOTO: Fast Company)
Treasury Targets Wealthy and Real Estate Partnerships in Tax Loophole Closure to Boost Government Revenue
Additionally, the crackdown mainly targets wealthy individuals and big partnerships, like those in real estate, who use these strategies to shield large incomes from taxes. The Treasury’s move aims to close loopholes that don’t benefit the U.S. economy but have let some avoid paying their fair share of taxes, ensuring that more tax money goes into government funds.
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