The U.S. Treasury and the Internal Revenue Service (IRS) are joining forces to close a significant tax loophole that has allowed wealthy individuals and partnerships to avoid paying their fair share of taxes. This move is part of an effort to enhance tax fairness and potentially increase government revenue by $50 billion over the next decade.
The loophole in question, known as “basis shifting,” has been used by complex partnerships to manipulate deductions on assets, effectively lowering the amount of tax they owe. This practice has been criticized for allowing wealthy taxpayers to avoid paying the taxes they should be paying.
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According to the International Business Times, IRS Commissioner Danny Werfel emphasized the need to crack down on these tactics, stating that they enable taxpayers to avoid paying what they owe. Treasury Secretary Janet Yellen echoed this sentiment, highlighting the importance of fairness in the tax system and the need to reduce the federal deficit.
The new rules are a result of a thorough study of “basis shifting” transactions that lack a genuine economic purpose. According to Deputy Treasury Secretary Wally Adeyemo, closing these loopholes could generate an additional $5 billion in tax revenue each year, totaling approximately $50 billion over the next decade.
The crackdown primarily targets high-net-worth individuals and large partnerships, particularly those in the real estate sector, who have used these strategies to shield their incomes from taxes. The Treasury’s goal is to close loopholes that do not benefit the U.S. economy and ensure that more tax revenue goes into government funds.
