How do Investments by Tax Exempts Fall Into Trouble?

Time and again the IRS and Congress have expressed concern over the potential for abuse in the area of Tax-Exempt Organizations (TEOs). IRS enforcement and congressional activity have been constant when it comes to seeking out ways taxpayers are using TEOs to lower their tax bills. And yet, TEOs remain a popular tax-planning tool in some instances, requiring tax practitioners to be aware of both the potential opportunities as well as the pitfalls of using TEOs to reduce taxable income in select circumstances. Patrick C. Gallagher takes a close look at the tensions, hotspots and pitfalls of TEOs in the recently published University of Chicago special issue of TAXES—The Tax Magazine. His in-depth article looks at how investments by TEOs are examined by the IRS as well as what exactly are the rules for making such investments remain tax-exempt.

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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.

Read this article from CCH’s Journal of Taxation of Financial Products.


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