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DC CURRENTS
Reportable transactions:
A compliance update
Authors: Concerns about the growth of abusive ■ Confidential transactions;
Mark Heroux, J.D. tax-avoidance transactions led the IRS ■ Transactions with contractual
Mai Chao Thao, J.D. and Treasury to issue Regs. Sec. 1.6011- protection;
4 in 2003, which allowed the Service to ■ Loss transactions; and
quickly identify and deal with abusive or ■ Transactions of interest.
potentially abusive transactions. Listed transactions: A listed trans-
Because of a recent series of court action is a transaction that is the same as
decisions — Mann Construction, Inc., or substantially similar to one the IRS
27 F.4th 1138 (6th Cir. 2022); CIC has determined to be a tax-avoidance
Services, LLC, No. 3:17-cv-110 (E.D. transaction and that has been identified
Tenn. 3/21/22); and Green Valley Inves- in a notice, regulation, or other form of
tors, LLC, 159 T.C. No. 5 (2022) — it published guidance as a listed transac-
is worth revisiting Regs. Sec. 1.6011-4. tion (Regs. Sec. 1.6011-4(b)(2)). Listed
Despite recent court Those courts have invalidated the IRS’s transactions arguably are the most
rulings against the efforts to designate certain transactions potentially abusive transactions. Many of
as reportable, because the agency failed
them relate to the tax shelter days of the
IRS’s promulgation to follow proper procedures under the early 2000s.
of related notices, Administrative Procedure Act (APA). The IRS has identified 36 listed
This column first provides some
taxpayers and background on reportable transactions, transactions, only two of them since
2008. Practitioners recognize listed
their advisers must then discusses these three court rulings transactions as those that the IRS
attend to reportable- and what they may mean for clients that closely monitors.
Confidential transactions: A
have reportable transactions.
transaction regimes. confidential transaction is offered to a
Reportable transactions taxpayer by an adviser under conditions
Under Regs. Sec. 1.6011-4, taxpayers of confidentiality and for which the
that have participated in reportable taxpayer has paid the adviser a fee of at
transactions must disclose them on least a minimum amount prescribed in
Form 8886, Reportable Transaction Dis- the regulations (Regs. Sec. 1.6011-
closure Statement. Material advisers with 4(b)(3)). Most practitioners recognize
respect to these reportable transactions that confidential tax transactions should
must also disclose such information on be avoided. Tax transparency is important PHOTO BY CELSODINIZ/ISTOCK/THINKSTOCK
Form 8918, Material Advisor Disclo- to a well-functioning tax system. It is not
sure Statement. surprising that case law is absent in the
Five types of transactions are report- area of confidential tax transactions.
able under Regs. Sec. 1.6011-4: Transactions with contrac-
■ Listed transactions; tual protection: A transaction with
42 April 2023 The Tax Adviser
