The Internal Revenue Service announced last week that it has collected more than $3.2 billion from wealthy people in its most ambitious effort ever to crack down on improper tax shelters.

IRS Commissioner Mark Everson said at a news conference that there has been "some real pain" among the 1165 taxpayers participating in the "Son of Boss" tax shelter settlement, adding that "Some people have had to sell their villas and yachts" to come up with the money.

Everson added that there were nearly 400 people who chose not to participate and another 200 involved in the tax shelter failed to 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 very 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% of those participating in the shelter, which was popular in the 1990s, were wealthy individuals, business owners and corporations.

He said this project dwarfed previous efforts to pursue tax evaders. A program initiated 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.

"This was not a bargain-basement deal," he said. Under the terms of the program, people were required to pay back 100% of the claimed tax losses, as well as paying a penalty of either 10% or 20%.

Those choosing to litigate their case instead of participating in the initiative are faced with assessment of the maximum penalty of 40%. Everson added that those going to court will be publicly named, while the IRS will not publicize the names of those participating in the settlement.

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