Treasury Warns Against Some Tax-Aware Strategies

Dow Jones
09/30

A top Treasury Department official cautioned investors not to assume that the agency's push against so-called tax-aware strategies will apply only to future transactions.

Kevin Salinger, the acting assistant secretary for tax policy, said he had heard that some people were increasing their use of aggressive tax-reducing investment techniques after officials' prior verbal warnings, operating on the theory that they could front-run a government deadline.

"I do not recommend that approach," Salinger, who is also the acting Internal Revenue Service chief counsel, said at a tax conference in New York on Tuesday afternoon.

On Monday, the Treasury Department listed a series of transactions-including techniques using swaps, foreign currency and exchange-traded funds-as potentially abusive moves that could face future crackdowns. Future rules to limit those maneuvers could be retroactive.

The government took formal action against one ETF strategy known as a 351 conversion transaction, which purports to let investors diversify concentrated positions without paying capital gains taxes. Salinger noted that Monday's action would let the IRS assert its position in audits of transactions that have already happened.

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