Reportable transactions are defined by Treasury Regulation Section 1.6011-4 and include several categories of transactions. Many times these transactions are perfectly legitimate; however, the government requires disclosure. Click here for a list and description of IRS Reportable Transactions or view the document below for a summary.
Transactions of Interest
Transactions the IRS and the U.S. Department of the Treasury (Treasury) believe have the potential to enable tax avoidance or evasion, but lack sufficient information, specifically identify as a tax avoidance transaction. Click here for a list and description of IRS transactions of interest or view the document below for a summary.
A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions the IRS has determined to be a tax avoidance transaction. Click here for a list and description of IRS listed transactions or view the document below for a summary.
The 2004 Act also provides similar penalties for “material advisors” who fail to register any reportable transaction with the IRS or keep investor lists as required. The penalties apply to transactions entered into after October 22, 2004.
Each material advisor is required to file a Form 8918 to register any reportable transaction and maintain an investor list open to IRS inspection.
In general, a material advisor is a person who receives or expects to receive a minimum fee with respect to a reportable transaction, and the person makes a “tax statement” to or for the benefit of a participant in the reportable transaction. The minimum fee is $250,000 if every person who benefits from the transaction is a C corporation and $50,000 for all others, including partnerships (tiered or otherwise) with an individual partner. The amount is reduced to $25,000 and $10,000, respectively, for listed transactions.
Material advisors who fail to file Form 8918 are subject to a $50,000 penalty per incident. If the transaction is a listed transaction, the penalty is increased to the greater of (1) $200,000 or (2) 50 percent of the fees received by the material advisor for providing advice to the taxpayer. Material advisors who fail to maintain the list of investors open to IRS inspection are subject to a $10,000-per-day penalty. Plus, the statute of limitations is suspended for any listed transaction that is not disclosed.