Crackdown on tax shelter nets the IRS $3.2 billion

WASHINGTON (AP) — The IRS has collected more than $3.2 billion, mainly from wealthy people, in its most ambitious effort ever to crack down on improper tax shelters, the agency said Thursday.

There's been "some real pain" among the 1,165 taxpayers who are participating in the "Son of Boss" tax shelter settlement, IRS Commissioner Mark Everson said at a news conference. "Some people have had to sell their villas and yachts" to come up with the money.

Everson said there were still some 400 people who have chosen not to participate and another 200 involved in the tax shelter who didn't qualify for the settlement plan. The agency should garner some $3.5 billion before the project concludes in the coming months, he said.

A spinoff of an older shelter called "Boss," the scheme known as "Son of Boss" is a highly complex, no-risk strategy where promoters such as accounting firms and investment banks sold financial products that generated losses to offset large gains, often from selling a business or exercising stock options.

Everson said more than 90 percent of those who participated in the shelter, popular in the 1990s, were wealthy individuals. Others included business owners and corporations.

He said this project dwarfed previous efforts to pursue tax evaders. A program to crack down on improper use of offshore credit cards netted $270 million, equivalent to the amount paid by just three individuals in the "Son of Boss" initiative. One person paid back more than $100 million, and the average was nearly $1 million.

The IRS noted that many participants have also amended their state tax returns. Among states benefiting from this, Arizona, Illinois, Maine, Maryland, Michigan, New York, Ohio, Utah and Virginia have collected $23.5 million