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KPMG Facing Lawsuits Over Tax Shelter Advice

by Mike Godfrey, For LawAndTax-News.com, Washington

11 June 2003

According to a recent report in the Wall Street Journal, the increasing number of lawsuits building up against the accounting firm KPMG reveals how widely tax shelter strategies were marketed in recent years.

KPMG says the that the suits, including the first to be filed in a West Coast Court following a string of similar actions in the South and South East, are unfounded and maintains that the advice given in these instances was entirely appropriate. "We provide clients with appropriate tax-planning services, which are fully supported" by the tax code and related regulation, KPMG said in a statement.

The latest case against the firm, filed by entrepreneur Theodore Swartz in a Seattle federal Court, concerns advice given by KPMG following the sale of his educational travel company in 1999. According to the WSJ, Swartz was advised to shield his $18 million capital gains using a scheme known as 'BLIPS' which transferred credit to a newly formed partnership which was dissolved a couple of months later. Mr Swartz then claimed an $18.2 million loss on his tax return, offsetting the capital gains.

IRS documents seen by the WSJ reveal that KPMG apparently advised a further 186 clients to use this strategy in 1999 and 2000, after the revenue service filed for access to the information in a Washington D.C federal court as part of a crackdown on abusive tax shelters. Mr Swartz's action comes as part of an IRS campaign aimed at reducing penalties for those who volunteer information on tax shelter schemes.

http://online.wsj.com/article/0,,SB105518870785068600-search,00.html?collection=wsjie%2F30day&vql_string=KPMG%3Cin%3E%28article%2Dbody%29

 

 






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