Page 5 - A Crash Course On Reportable Transaction Penalties For Material Advisors

tion is listed, not a material advisor on a substantially similar transac- tion.58 The IRS may still consider re- liance on an advisor, even if that per- son turns out not to be an intendent advisor, in determining reasonable cause.59
HOW ARE MATERIAL ADVISOR PENALTIES CHALLENGED?
Both of these penalties, the failure to file the Form 8918 and the failure to timely respond to a list maintenance request, are “assessable penalties,” which means that they are not subject
NOTES
57 Reg. 301.6708-1(g)(5)(i).
58 Reg. 301.6708-1(g)(5)(ii).
59 Reg. 301.6708-1(g)(5)(i).
60 Section 6671.
61 Rev. Proc. 2007-21.
62 Thelistofmaintenancepenaltiesaredivisibleforthe
purposes of establishing refund suit jurisdiction, so that the material advisor can thus pay the penalty for
to Tax Court review, but must be paid upon notice and demand.60 Material advisors may request abatement of penalties from IRS Appeals within 30 days after the IRS sends notice and demand for payment of the penalty.61 Alternatively, material advisors may pay the penalty and bring a refund claim in federal district court,62 or if the material advisor was not provided with an opportunity for Appeals re- view, the advisor may seek limited re- view of these penalties through the collection due process procedures.63
As noted above, for the Form 8918 penalty, a material advisor also can
a single violation, i.e., one day of noncompliance, and then file a claim for refund. CCA 200646016.
63 See Yari, 143 TC no. 7 (2014) (Tax Court had jurisdiction to review denial of collection due process relief for taxpayer assessed penalties for failure to disclose a reportable transaction); iRM 8.22.8.16.
64 Reg. 301.6707A-1(d); Rev. Proc. 2007-21. 65 Section 6707A(d)(2).
request rescission of the penalty. This request must be submitted within 30 days after the date that the IRS sends a notice and demand for payment of the penalty, or if the timely advisor pays the penalty, the deadline for the rescission request is 30 days from the date of payment.64 The IRS’s decision regarding rescission is not reviewable by the Appeals or any court.65
CONCLUSION
The IRS’s decision to identify new transactions as listed transactions and transactions of interest demon- strates its intent to continue to en- force these rules. This “crash course” should provide one with the basic rules to determine whether an indi- vidual or a firm is a material advisor, and to take the necessary steps to comply with the law and avoid penalties. I
164 BJOuRnAl Of TAxATiOnG OCTObeR 2017
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