Taxpayers were afforded the opportunity to participate in a "Son-of-Boss" settlement initiative announced in May, 2004. Taxpayers who qualified for the offer paid outstanding tax, interest and applicable penalty. IRS conducted a settlement initiative from October 2002 through March 2003 to allow taxpayers engaged in certain abusive transactions to resolve the tax consequences arising from their participation in the transactions. The transactions covered by the initiative were §302 / 318 Basis Shifting, §351 Contingent Liabilities, and Corporate Owned Life Insurance (COLI).

The Department is strongly encouraging taxpayers that participated in IRS initiatives to contact the Tax Shelter Unit to negotiate similar settlements to avoid being penalized to the greatest extent under Arizona law.

Federal Listed Transactions

Please see http://www.irs.gov/businesses/corporations/article/0,,id=120633,00.html for IRS “Listed Transactions.”

Statute of Limitations

Under Arizona law, the Department has a general 4 year statute of limitations. The exceptions to the general rule, include IRS changes to a taxpayer’s federal taxable income. Where there are IRS changes, if the taxpayer notifies the Department within 90 days, the statute of limitations is 6 months. If the taxpayer fails to timely notify the Department, the statute of limitations is 4 years from the federal final determination.

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