PROFIT: The 2021 IRS “Soiled Dozen” – the ultimate spherical |

In our fourth and final filing for the IRS 2021 Dirty Dozen, we take a look at what the IRS calls “Promoted Abusive Agreements”. You can check out the scams that have been written about in my first three parts of this weekly column, published for the last three consecutive weeks.

The IRS warns people to be on the alert for tax promoters who are aggressively raising false hopes for high tax deductions from the following abusive agreements. While these are quite limited in their applicability for most people, they can still be something you need to be aware of.

Conservation easements syndicated promoters take a conservation easement tax law provision and twist it by using inflated estimates of undeveloped land and partnerships. These abusive agreements are designed to trick the system into excessive and unjustified tax deductions, often through inflated estimates of vacant lots and partnerships with no legitimate business purpose. You can find more information at

In abusive micro-captive agreements, promoters persuade the owners of closely-knit units to participate in systems that appear like insurance but that lack many of the characteristics of insurance. For example, coverage may “insure” untrustworthy risks, inconsistent with real business needs, or duplicate the taxpayer’s commercial coverage. But the so-called “bonuses” paid under these agreements are often excessive and are used to evade tax law. For more information, visit -offers-settlement-for-micro -captive-insurance-schemes -letters-being-mailed-to -groups-under-audit.

Recently, the IRS stepped up enforcement against a variation that uses potentially abusive offshore proprietary insurance companies based in Puerto Rico and elsewhere.

Next (and new) is the potentially abusive use of the US-Malta tax treaty. Some US citizens and residents rely on an interpretation of the US-Malta Income Tax Treaty to take the position that they can pay an estimated property tax into certain Maltese pension plans free of charge and that there are no tax consequences if the Plan sells the assets and distributes the proceeds to the U.S. taxpayer.

Normally, a gain would be recognized on the sale of plan assets and the distribution of the proceeds. The IRS is examining the matter to determine the validity of these agreements and to determine whether contractual benefits should be granted in such cases. It can challenge the tax treatment associated with it, so be careful before entering into such a transaction.

Improper business credit claims for the research and experimental credit typically include failure to participate in or substantiate qualified research activities and / or to meet qualified research spending requirements. In order to be eligible for a research loan, you must evaluate and adequately document your research activities over a period of time to determine the amount of Qualified Research Spend paid for each Qualified Research Activity. Affected taxpayers should carefully review reports or studies to ensure they accurately reflect the taxpayer’s activities.

Improper monetized installment sales are the last scheme on the list. Promoters find taxpayers trying to defer recognition of profits on the sale of valued real estate and organize abusive housing by selling them monetized installment sales.

These transactions occur when an intermediary purchases a valued property from a seller in exchange for an installment payment that typically only involves interest payments, with the principal paid at the end of the term. Under these arrangements, the seller receives the lion’s share of the proceeds, but unduly delays recognition of the profit on the valued property until the final payment on the installment note, which is often scheduled for many years later.

The IRS continues to pursue action against the promoters of these schemes and the taxpayers involved in them. IRS Commissioner Chuck Rettig says, “We are stepping up our enforcement efforts against abusive agreements. Don’t get lulled into these seedy deals. The IRS recommends anyone who has participated in any of these abusive agreements to consult an independent attorney to ensure compliance. “

And that’s it for this year’s IRS Dirty Dozen. While it is not possible to completely stop unscrupulous behavior, armed with the knowledge I have presented over the past four weeks, and with great care you can avoid unknowingly falling victim to the “dirty dozen”!

Lane Keeter, CPA, is the Office Managing Partner of the Heber Springs office of EGP, PLLC, CPAs & Consultants (a full-service financial firm with offices in Heber Springs, North Little Rock, and Bryant) and a former Sun-Times Reader’s Choice winner Award for the best accountant.