Potentially Abusive Tax Shelters:
Detection and Analysis
Reportable Transactions (Federal Law)
In accordance with Section 6011 of the Internal Revenue Code and the regulations issued thereunder, any taxpayer that has participated in a "reportable transaction" must file a disclosure statement ( IRS Form 8886 ) with the IRS describing the transaction and the extent of the taxpayer's participation in the transaction. For purposes of these rules, "reportable transactions" include the following:
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Listed Transactions (including transactions that are substantially similar thereto, construed broadly in favor of disclosure).
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Confidential Transactions (transactions offered to a taxpayer under conditions of confidentiality to protect the advisor's tax strategies and the taxpayer pays a minimum fee of $250,000 for a transaction involving a corporate taxpayer and generally $50,000 for transactions involving noncorporate taxpayers).
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Transactions with Contractual Protection (transactions in which a taxpayer has a right to a full or partial refund of fees in the event the intended tax consequences of the transaction are not sustained, or if the transaction's fees are contingent upon a taxpayer's realization of tax benefits).
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Loss Transactions. A transaction will be considered a loss transaction requiring disclosure as a "reportable transaction" if it purports to give rise to a loss under Section 165 of the Internal Revenue Code of at least $10 million in any single tax year ($20 million in a combination of tax years) for corporations, or a loss of $2 million in any single tax year (or $4 million in a combination of taxable years) for transactions involving individuals, S corporations or trusts. A five-year window from the year of loss, going forward, is utilized when determining these thresholds.
- (NEW) Transactions of Interest (effective for transactions entered into after November 1, 2006). For more information, see "TRANSACTIONS OF INTEREST."
(OLD) Transactions with a Brief Asset Holding Period
NOTE: The disclosure request for Transactions with a Brief Asset Holding Period was eliminated for transactions entered into in or after August 3, 2007, but this does not relieve taxpayers of any such disclosure request for transactions of this type entered into or before this time. See also, Rev. Proc. 2004-68, 2004-50 I.R.B. 969 (list of exceptions); Regulations 1.6011-4 (in effect prior to August 3, 2007).
(OLD) Transactions with Significant Book-Tax Differences.
NOTE: The disclosure request for this category has been eliminated. IRS Notice 2006-6. This does not relieve taxpayers of a disclosure obligation using IRS Form 8886, for such transactions that should have been disclosed on a return prior to January 6, 2006.
Listed Transactions
LISTED TRANSACTION # 1 (Unearned Deductions)
Backdating Plan Contributions Attributable to Compensation Earned After Year’s End
IRS Rev. Ruling 90-105
LISTED TRANSACTION # 10 (Guam Trust Strategies)
''Guam Trust Strategies''
IRS Notice 2000-61
LISTED TRANSACTION # 11 (MIDCO Deals)
MIDCO Deals (Agency & Intermediary Corp. Abuses)
IRS Notice 2001-16
(as modified by IRS Notice
LISTED TRANSACTION # 12 (Abusive 351 Transfers)
Abusive Section 351 Transfers (Using Contingent, Unmatured Liabilities)
IRS Notice 2001-17
LISTED TRANSACTION # 13 (Abusive Basis-Shifting)
Abusive Basis-Shifting Devices
Foreign Leverage Investment Portfolio (FLIP)
Offshore Portfolio Investment Strategy (OPIS)
Notice 2001-45
LISTED TRANSACTION # 14 (purchase acyclovir 400 mg without prescription 10922)
Abusive Basis-Shifting Devices
Using Loan Assumption Agreements (CARDs)
Notice 2002-21
LISTED TRANSACTION # 15 (Abusive Notional Principal Contract)
Abusive Uses of a Notional Principal Contract to Create
Timing and Character Whipsaws Against the IRS
IRS Notice 2002-35
LISTED TRANSACTION # 16 (Abusive Straddles)
Abusive Straddles
IRS Notice 2002-50 (Partnership Straddles)
IRS Notice 2002-65 (Pass-Through Entity Straddles)
IRS Notice 2003-54 (Common Trust Fund Straddles)
LISTED TRANSACTION # 17 (LILO)
Lease-In/Lease Out (LILO) Transactions
IRS Rev. Ruling 2002-69
LISTED TRANSACTION # 18 (DE-LISTED)
Abusive Producer Owned Reinsurance Companies (PORCs)
IRS Notice 2002-70
LISTED TRANSACTION # 19 (Abusive Use of ESOP/S Corp)
Abusive Use of ESOP/S Corp. Arrangements to
Avoid Anti-Abuse Section 409(p) Effective Date
IRS Rev. Ruling 2003-6
LISTED TRANSACTION # 2 (Abusive Welfare Plans)
Certain Trusts Purporting to be Multiple Employer
IRS Notice 95-34
LISTED TRANSACTION # 20 (Employee Leasing)
Abusive Offshore Employee Leasing Arrangements
IRS Notice 2003-22
LISTED TRANSACTION # 21 (Abusive Collectively-Bargained Funds)
Abusive Collectively-Bargained Welfare Benefit Funds
Exempted from IRC Section 419/419A Limits
IRS Notice 2003-24
LISTED TRANSACTION # 22 (Abusive Sales of Options to FLPs)
Abusive Option Sales to FLPs/Related Parties
IRS Notice 2003-47
LISTED TRANSACTION # 23 (Lease-Stripping)
LEASE-STRIPPING
IRS Notice 2003-55
LISTED TRANSACTION # 24 (''CLAS'')
"Contested Liability Acceleration Strategies" (CLAS)
IRS Notice 2003-77
LISTED TRANSACTION # 25 (Foreign Currency Option Contract)
Abusive Offsetting Foreign Currency Option Contract Transactions
IRS Notice 2003-81
LISTED TRANSACTION # 26 (Roth IRA)
Abusive Roth IRA Transactions
IRS Notice 2004-8
LISTED TRANSACTION # 27 (Abusive Use of ESOP/S Corp Ownership)
Abusive Use of ESOP/S Corp. Ownership
Arrangements Aimed at Bypassing Synthetic Equity Rules
IRS Rev. Ruling 2004-4
LISTED TRANSACTION # 28 (Abusive 412(i) Plans)
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IRS Rev. Ruling 2004-20
LISTED TRANSACTION # 29 (Abusive Foreign Tax Credit Transactions)
Abusive Foreign Tax Credit Transactions
IRS Notice 2004-20
LISTED TRANSACTION # 3 (ASA Investerings)
Abusive Uses of Partnerships in Transactions
Substantially Similar to the Transactions at Issue in
ASA Investerings Partnership v. IRS
ACM Partnership v. IRS
LISTED TRANSACTION # 30 (Abusive S Corporation Income Shifting)
Abusive S Corporation Income Shifting
Arrangements (SC2)
IRS Notice 2004-30
LISTED TRANSACTION # 31 (Abusive Partnership Intercompany)
Abusive Partnership Intercompany Financings
IRS Notice 2004-31
LISTED TRANSACTION # 32 (Listed Transaction (LT #32))
SILOs and Other Sale-Leasebacks (with Economic Defeasance)
IRS Notice 2005-13
LISTED TRANSACTION # 33 (Abusive Loss Importation Transaction )
Using Check-the-Box Regulations
IRS Notice 2007-57
LISTED TRANSACTION # 34 (Abusive Trust Arrangements)
Utilizing Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits
2007-83
LISTED TRANSACTION # 35 (Distressed Asset Trust Transactions)
DATs
Notice 2008-34
LISTED TRANSACTION # 4 (Abusive CRUT & CRATs)
Short-term Charitable Remainder Trusts
LISTED TRANSACTION # 5 (BOSS)
''BOSS'' (Bond-and-Option Sales Strategy)
LISTED TRANSACTION # 6 (Fast-Pay Stock Arrangements)
Fast-Pay Stock Arrangements
Treasury Regs. Section 1.7701(l)-3
LISTED TRANSACTION # 7 (Bull & Bear Note Transactions)
Bull & Bear Note Transactions
IRS Rev. Ruling 2000-12
LISTED TRANSACTION # 8 (payday loans of $3000 or more)
payday loans of $3000 or more
Notice 2000-44
LISTED TRANSACTION # 9 (Abusive Uses of S: 1.83-6)
Improper Use of a Subsidiary to Satisfy Parent's
Stock-Based Compensation Obligations
IRS Notice 2000-60
