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However, an existing regime of reportable transac-
tions makes such stratagems riskier than they would
be otherwise. The following discussion outlines
the requirements for reportable transactions and
penalties for failing to comply, both for taxpayers
and their advisers.
REPORTABLE TRANSACTIONS
Regs. Sec. 1.6011-4 provides that taxpayers who are About the
required to file a tax return and that participate in authors
a “reportable transaction” for any tax year must dis-
Ray A. Knight,
close information about the transaction to the IRS
CPA/PFS, CGMA,
in a manner and time specified in the regulations.
J.D., is a professor
Secs. 6111 and 6112 further require any material
of accounting at
adviser with respect to a reportable transaction to
Elon University in
disclose information about the transaction to the
Elon, N.C., and Lee
IRS and to maintain a list of persons he or she has
G. Knight, Ph.D.,
advised with respect to it.
is a professor
A reportable transaction is any transaction for
of accounting
which the IRS requires information to be included
emerita at Wake
with a return or statement because the Service
Forest University
has determined, pursuant to the regulations under
in Winston-Salem,
Sec. 6011, that the transaction is of a type that has
N.C.
the potential for tax avoidance or evasion (Sec.
6707A(c)(1)). The term “transaction” includes all the
factual elements relevant to the expected tax treat-
ment of any investment, entity, plan, or arrange-
ment and includes any series of steps carried out as
part of a plan (Regs. Sec. 1.6011-4(b)(1)).
TYPES OF REPORTABLE TRANSACTIONS
The types of reportable transactions include:
usinesses and individuals may structure their
transactions in a tax-efficient manner, but Listed transactions
Bwhen a transaction’s expected tax results A listed transaction is defined in Regs. Sec.
eclipse its economic substance, the IRS may deny 1.6011-4(b)(2) as a transaction that is the same or
those benefits. With President Joe Biden’s ad- similar to one that the IRS has determined to be a
ministration wanting to reduce the tax gap — the tax-avoidance transaction and identified in a notice,
estimated annual amount of taxes owed but unpaid regulation, or other publication. Listed transactions
— of as much as $1 trillion and to provide the IRS include, for example, claiming deductible losses
with $80 billion in additional funding, partly to on a disposition of stock by applying rules relating
do so, taxpayers and their advisers should be aware to distributions to shareholders of encumbered
that the nation may be entering a new tax enforce- property to give the stock an artificially high basis
ment era (testimony of IRS Commissioner Charles (see Notice 99-59) and similar arrangements
Rettig to the Senate Finance Committee, April in a disposition of partnership interests (Notice
13, 2021; Treasury, The American Families Plan Tax 2000-44). These are popularly known, respectively,
Compliance Agenda, May 2021, pp. 1 and 16). as boss (bond and option sales strategy) and son-of-
At the same time, with the administration and boss transactions. Other listed transactions involve
Congress proposing higher taxes for taxpayers with such practices as lease stripping (Notice 2003-55)
more than $400,000 in income, strategies to shelter and, highlighted more recently, certain syndicated
income and gains could become more tempting. conservation easements (Notice 2017-10). A

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