US Treasury warns against Virgin Islands tax reduction scheme
Tuesday, June 29, 2004
WASHINGTON, USA: The US Treasury Department
and the Internal Revenue Service last week issued a notice warning US
taxpayers against promoters who market arrangements that purportedly provide
reductions in federal taxation as a result of the special rules applicable to
the US Virgin Islands.
These arrangements involve taking positions
that are highly questionable with respect to claims that the taxpayer resides
in the US Virgin Islands and that the taxpayer's income is from sources in the
US Virgin Islands or is connected with a US Virgin Islands business.
The notice describes a form of arrangement
that has been promoted and that involves running a taxpayer's salary or
business income through a US Virgin Islands entity such as a limited
partnership. The notice warns, however, that these questionable positions may
also be promoted through other forms of arrangements and with respect to US
possessions other than the US Virgin Islands.
Acting Assistant Secretary for Tax Policy Greg Jenner explained, "This notice
is another example of our ongoing efforts to prevent promoters and taxpayers
from making highly questionable arguments, and setting up dubious
arrangements, in an attempt to avoid paying their fair share of taxes."
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