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U.S. closes Guam-based tax shelter
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Posted on Nov 23 2000
WASHINGTON (AP) – The Clinton administration shut down another tax shelter Tuesday, this one using trusts based on Guam to avoid income taxes imposed by both that U.S. territory and the federal government.
According to the Treasury Department and the Internal Revenue Service, the shelter was marketed to take advantage of a law, meant to apply only to individual taxpayers, that allows payment of both Guam and federal income taxes with a single return.
Under the scheme, a trust was characterized as an individual under that law in a manner that effectively avoided payment of all taxes.
An IRS notice states that trusts cannot be considered individuals, and the law “does not relieve a trust for any obligation it may have” to file a U.S. income tax return and pay federal taxes.
The law, according to a Treasury Department announcement, “applies to relieve only individuals of the burden of filing two tax returns.”
The shutdown marks the second such action in less than a week and is part of a series of efforts spearheaded by Treasury Secretary Lawrence Summers to improve tax law compliance and slow the growth of shelters. There was no estimate on how much the Guam shelter might have cost the government.
