IRS To Force Andersen To Speak On Tax Shelters

by Leroy Baker, Tax-News.com, New York

26 September 2002

The US Internal Revenue Service has filed a petition with the Chicago Federal Court asking that 19 demands for information on tax shelters recommended by consulting firm, Arthur Andersen, filed some five months ago, be legally enforced.

This forms part of the wider IRS investigation into the use of 'improper', or 'abusive' tax shelters. In addition to questioning the ailing accounting organisation over a potential $1.6 billion in potentially improper deductions, the tax agency has also this year sued KPMG and BDO Seidman over tax shelter information which they were allegedly reluctant to provide.

Speaking to the Bloomberg news service earlier this week, Patrick Dorton, spokesman for Chicago-based Andersen - which was recently convicted of obstruction of justice in relation to the collapse of Enron - suggested that the accounting firm has already been very cooperative in the IRS tax shelter investigation:

'Our firm provided significant amounts of information already to the IRS,' he explained. 'At the same time we need to balance our client confidentiality obligations.'

However, going on past experience, client confidentiality does not appear to top of the IRS's list of priorities. In the summons related to the KPMG investigation issued in July, the IRS named over 100 clients, including celebrities, prominent politicians, and leading businessmen, despite the fact that none of the individuals 'exposed' had been accused of any wrongdoing.

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