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participants in his programs that the programs created legitimate
investments that would entitle participants to interest
deductions that they should claim on their individual tax
returns.
B. Respondent’s Kersting Project
1. In General
Kersting’s promotion of his tax shelter programs had
attracted the attention of the Internal Revenue Service (IRS),
which instituted a tax shelter project known as the Kersting
project.9 In furtherance of that project, respondent sent
deficiency notices to more than 1,800 taxpayers who had
participated in the Kersting programs.
The IRS established the Kersting project in its Honolulu
Appeals Office. In any given tax shelter project, a project
Appeals officer typically works with a project attorney from the
District Counsel’s Office. In the Kersting project, McWade, from
9Tax shelter projects were initiated to deal with the large
volume of cases generated by tax shelter examinations during the
late 1970s and the early 1980s. Among the responses of the IRS
and the Tax Court were the development of procedures, including
tax shelter projects, that were intended to streamline the
litigation process, economize on the use of administrative and
judicial resources, and reduce the costs incurred by taxpayers in
resolving disputes over tax shelter adjustments. The IRS, Office
of Chief Counsel, created the Tax Shelter Branch in the National
Office to oversee tax shelter litigation across the country and
to organize individual tax shelter projects. The projects
generally focused upon a specific type of tax shelter, such as
those promoted by Kersting that constituted the Kersting project.
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