Abusive Tax Shelters

Other Reportable Transactions

Confidential Transactions

A transaction will be viewed as a "confidential transaction" requiring disclosure on the IRS Form 8886 if it is one in which an advisor (1) restricts disclosure of the transaction's tax structure; and (2) is paid at least $50,000 if the taxpayer is not a corporation or pass-through entity wholly owned by corporations (or at least $250,000 if it is). At the Tufts Law Firm, we are prepared to assist you in making an analysis of a given transaction to determine if it otherwise qualifies as a "reportable transaction" under Federal tax disclosure laws, because of conditions of confidentiality invoked by a qualifying advisor. If you are interested in obtaining an assessment or PATS audit of a transaction, please contact us.

Transactions with Contractual Protection

A transaction will be viewed as a "transaction with contractual protection" requiring disclosure on the IRS Form 8886 if it is one in which a taxpayer has contracted for protection against the possibility that the taxpayer will not receive some or all of the anticipated or desired tax benefits from the contemplated transaction. At the Tufts Law Firm, we are prepared to assist you in making an analysis of a given transaction to determine if it otherwise qualifies as a "reportable transaction" under Federal tax disclosure laws, because it is a transaction with contractual protection. If you are interested in obtaining an assessment or PATS audit of a transaction, please contact us.

Loss Transactions

A transaction will be viewed as a "loss transaction" requiring disclosure on the IRS Form 8886 if it is one that results in taxpayers being able to report Internal Revenue Code Section 165 losses in excess of certain amounts that are based on the type of taxpayer involved (i.e., corporation, partnership, individual, or trust). At the Tufts Law Firm, we are prepared to assist you in making an analysis of a given transaction to determine if it otherwise qualifies as a "reportable transaction" under Federal tax disclosure laws, because it is a "loss transaction" as defined by the Federal tax disclosure laws. If you are interested in obtaining an assessment or PATS audit of a transaction, please contact us.

Transactions with a Significant Book-Tax Difference

Even if a transaction is not a listed transaction (or substantially similar thereto), the transaction may still qualify as a "potentially abusive tax shelter" ("PATS") and subject to disclosure on IRS Form 8886. Under Regulations issued under Internal Revenue Code Section 6011 (Regs. Section 1.6011-4), there are 6 categories of reportable transactions, the first of which are IRS Form 8886 if it is one in which the federal income tax treatment of any item or items differs by more than $10 million on a gross basis from that item's or items' treatment for book accounting purposes. A number of exemptions exist in applying these particular rules.

On July 7, 2004, the Treasury Department and the IRS released a draft of a final version of a new Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More. This new schedule expands on the information required to be disclosed under current Schedule M-1. The new Schedule M-3 is effective for any tax year ending on or after December 31, 2004. According to Tax Executives Institute, Inc. (TEI), this schedule is intended to assist the IRS to identify high-risk issues to determine whether a return should be audited, streamline corporate audits, and eventually eliminate disclosures required for book-tax differences on IRS Form 8886. See BNA Daily Tax Report, ISSN 1532-5229 (No. 141, July 23, 2004)(July 21, 2004 letter from TEI to the Treasury Department and IRS).

Also, as clarified in IRS Rev. Proc. 2004-45, a taxpayer is required to disclose transactions with a significant book-tax difference under these Federal tax law disclosure rules only if the taxpayer is either a reporting company under the Securities Exchange Act of 1934 or a business entity that has $250 million or more in gross assets for book purposes at the end of any financial accounting period that ends with or within the entity's tax year in which the transaction occurs. An alternative disclosure procedure is also provided under these rules. For tax years ending prior to December 31, 2004, there is no requirement to file Schedule M-3 so that corporations with significant book-tax differences must consider whether IRS Form 8886 must be filed or whether they are able to rely on certain transitional rules under the new IRS Rev. Proc. 2004-45.

At the Tufts Law Firm, we are prepared to assist you in making an analysis of a given transaction to determine if it otherwise qualifies as a "reportable transaction" under Federal tax disclosure laws, because it is a transaction with a significant book-tax difference. If you are interested in obtaining an assessment or PATS audit of a transaction, please contact us.

Transactions with a Brief Asset Holding Period

A transaction will be viewed as a "transaction with a brief asset holding period" requiring disclosure on the IRS Form 8886 if it is one in which the taxpayer gets a tax credit exceeding $25,000, but only held the asset giving rise to the credit for fewer than 45 days.

At the Tufts Law Firm, we are prepared to assist you in making an analysis of a given transaction to determine if it otherwise qualifies as a "reportable transaction" under Federal tax disclosure laws, because it is a transaction with a brief asset holding period. If you are interested in obtaining an assessment or PATS audit of a transaction, please contact us.