As part of its efforts to prevent abusive business transactions, the IRS provides guidance on and reaffirms a determination it made in 1999: A taxpayer may not deduct rent or interest paid or incurred in connection with a lease-in/lease-out (Lilo) transaction. (Tax Matters).

As part of its efforts to prevent abusive business transactions, the IRS provides guidance on and reaffirms a determination it made in 1999: A taxpayer may not deduct rent or interest paid or incurred in connection with a lease-in/lease-out (Lilo) transaction. In revenue ruling 2002-69, contained in IRB 2002-44 (www.irs.gov/pub/irs-irbs/irb02-44.pdf), the IRS says its position does not rely on the failure of such transactions to have a pretax profit potential or a business purpose. But the service nevertheless may challenge the tax treatment of transactions that do have such characteristics. The IRS says that Lilos confer only a future interest in property, not a current leasehold interest. IRB 1999-13 (www.irs.gov/pub/irs-irbs/irb99-13.pdf) contains the earlier ruling.