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Tax Shelters for Senior Management Targeted by IRS  

Author:  L. Nicholas Deane.

Source: Volume 21, Number 03, Spring 2004 , pp.310-326(17)

Journal of Taxation of Investments

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Attention regarding tax shelters is often focused on the sophisticated financial transactions marketed by major accounting firms to companies like Enron, which generally rely on complicated arbitrage techniques recognizing slight but expandable inconsistencies in the tax law.1 Another area, less the fodder of financial engineers than of compensation planners, includes a number of techniques that find holes in the structures of bonus and deferred compensation arrangements. This area has, in the last six months, received as much if not more attention from the IRS than the BLIPS, OPIS, FLIP, and other devices that have exercised the agency’s imagination and fired the public’s wrath. Some of the compensation approaches, largely designed to help those executives who are already highly compensated, are so easy to understand that it seems almost peculiar that they have not be “outed” by the IRS until now. Perhaps their obviousness explains why employers were not afraid to use them. Nevertheless, the times they are a-changin’, and the attacks being launched by the IRS are worthy of careful analysis.


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