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Resolution of SC2 Transaction


Internal Revenue Service
Large and Mid-Size Business Division             April 6, 2005

MEMORANDUM FOR    LMSB Leadership Team
                                          SBSE Leadership Team

FROM:                              Bobby E. Scott 
                                          Industry Director, Natural Resources and Construction

SUBJECT: Resolution of SC² Transaction

There will be no formal settlement initiative offer on the S Corporation Tax Shelter issue (or SC² transaction) described in Notice 2004-30. However, taxpayers will be offered an opportunity to resolve their cases based on the examiner's use of Delegation Order 4-25 and the Appeals Stated Position. Taxpayers will be allowed 30 days from the date of the offering letter to accept the offer. Taxpayers who do not resolve these issues should not expect a more favorable resolution in Appeals.

Please ensure that all agents and other personnel take appropriate action to offer all taxpayer's who engaged in this transaction an opportunity to resolve their issues based on Delegation Order 4-25 and the Appeals Stated Position. All examiners have been contacted by the SC² Issue Management Team and provided with instructions for issuance of the offering letter to the taxpayers. For those taxpayers who do not accept the offer, the agents should continue to work these issues expeditiously.