Listed Transaction (LT #6)

Fast-Pay Stock Arrangements
Treas. Regs. Section 1.7701(l)-3

Fast-pay stock is stock that is structured so that dividends paid by a corporation with respect to the stock are economically (in whole or in part) a return of the holder's investment (as opposed to only a return on the holder's investment). A presumption that stock is "fast-pay stock" arises if it is structured to have a dividend rate that is reasonably expected to decline (as opposed to expectations that it will fluctuate or remain constant) or if it is issued for an amount that exceeds the amount at which the holder can be compelled to dispose of the stock. In making this determination, all of the facts and circumstances are to be examined, including related side agreements and any direct or indirect oral or written understandings. In these settings, the IRS may apply certain recharacterization rules, but may depart from these rules when the taxpayer attempts to rely on these rules and has a principal purpose of tax avoidance.

If you believe that you may have engaged in a transaction that is the same or substantially similar to the transaction described above, Federal law may require you to disclose your and other parties' participation in any such "listed transaction" on IRS Form 8886. For more information about Federal law requirements, please contact us.