Special rules for tax shelters
(1) Recurring item exception not to apply
loading…
loading…
loading…
In the case of a tax shelter, economic performance shall be determined without regard to paragraph (3) of subsection (h).
(A) In general In the case of a tax shelter, economic performance with respect to amounts paid during the taxable year for drilling an oil or gas well shall be treated as having occurred within a taxable year if drilling of the well commences before the close of the 90th day after the close of the taxable year.
(B) Deduction limited to cash basis (i) Tax shelter partnerships In the case of a tax shelter which is a partnership, in applying section 704(d) to a deduction or loss for any taxable year attributable to an item which is deductible by reason of subparagraph (A), the term “cash basis” shall be substituted for the term “adjusted basis”. (ii) Other tax shelters Under regulations prescribed by the Secretary, in the case of a tax shelter other than a partnership, the aggregate amount of the deductions allowable by reason of subparagraph (A) for any taxable year shall be limited in a manner similar to the limitation under clause (i).
(C) Cash basis defined For purposes of subparagraph (B), a partner’s cash basis in a partnership shall be equal to the adjusted basis of such partner’s interest in the partnership, determined without regard to— (i) any liability of the partnership, and (ii) any amount borrowed by the partner with respect to such partnership which— (I) was arranged by the partnership or by any person who participated in the organization, sale, or management of the partnership (or any person related to such person within the meaning of section 465(b)(3)(C)), or (II) was secured by any asset of the partnership.
In the case of a tax shelter, economic performance with respect to amounts paid during the taxable year for drilling an oil or gas well shall be treated as having occurred within a taxable year if drilling of the well commences before the close of the 90th day after the close of the taxable year.
(i) Tax shelter partnerships In the case of a tax shelter which is a partnership, in applying section 704(d) to a deduction or loss for any taxable year attributable to an item which is deductible by reason of subparagraph (A), the term “cash basis” shall be substituted for the term “adjusted basis”.
(ii) Other tax shelters Under regulations prescribed by the Secretary, in the case of a tax shelter other than a partnership, the aggregate amount of the deductions allowable by reason of subparagraph (A) for any taxable year shall be limited in a manner similar to the limitation under clause (i).
In the case of a tax shelter which is a partnership, in applying section 704(d) to a deduction or loss for any taxable year attributable to an item which is deductible by reason of subparagraph (A), the term “cash basis” shall be substituted for the term “adjusted basis”.
Under regulations prescribed by the Secretary, in the case of a tax shelter other than a partnership, the aggregate amount of the deductions allowable by reason of subparagraph (A) for any taxable year shall be limited in a manner similar to the limitation under clause (i).
For purposes of subparagraph (B), a partner’s cash basis in a partnership shall be equal to the adjusted basis of such partner’s interest in the partnership, determined without regard to—
(i) any liability of the partnership, and
(ii) any amount borrowed by the partner with respect to such partnership which— (I) was arranged by the partnership or by any person who participated in the organization, sale, or management of the partnership (or any person related to such person within the meaning of section 465(b)(3)(C)), or (II) was secured by any asset of the partnership.
any liability of the partnership, and
any amount borrowed by the partner with respect to such partnership which—
(I) was arranged by the partnership or by any person who participated in the organization, sale, or management of the partnership (or any person related to such person within the meaning of section 465(b)(3)(C)), or
(II) was secured by any asset of the partnership.
was arranged by the partnership or by any person who participated in the organization, sale, or management of the partnership (or any person related to such person within the meaning of section 465(b)(3)(C)), or
was secured by any asset of the partnership.
For purposes of this subsection, the term “tax shelter” means—
(A) any enterprise (other than a C corporation) if at any time interests in such enterprise have been offered for sale in any offering required to be registered with any Federal or State agency having the authority to regulate the offering of securities for sale,
(B) any syndicate (within the meaning of section 1256(e)(3)(B)), and
(C) any tax shelter (as defined in section 6662(d)(2)(C)(ii)).
any enterprise (other than a C corporation) if at any time interests in such enterprise have been offered for sale in any offering required to be registered with any Federal or State agency having the authority to regulate the offering of securities for sale,
any syndicate (within the meaning of section 1256(e)(3)(B)), and
any tax shelter (as defined in section 6662(d)(2)(C)(ii)).
In the case of the trade or business of farming (as defined in section 464(e)), in determining whether an entity is a tax shelter, the definition of farming syndicate in subsection (k) shall be substituted for subparagraphs (A) and (B) of paragraph (3).