Abusive Tax Shelters

Transactions of Interest

Subpart F Income Partnership Blocker (IRS Notice 2009-7)

The IRS and the Treasury Department are aware of a type of transaction that in which a US taxpayer that owns CFCs that hold stock of a lower-tier CFC through a domestic partnership takes the position that subpart F income of the lower-tier CFC (or an amount determined under Section 956(a) related to holdings of US property by the lower tier CFC) does not result in income inclusion under Section 951(a) for the US taxpayer. The IRS and the Treasury Department believe that this transaction has the potential for tax avoidance or evasion, but lack sufficient information to determine whether the transaction should be “listed” (i.e., as a tax avoidance transaction).



NOTE: The IRS warns that while it continues to study these transactions, in appropriate situations, it may challenge the taxpayer’s position using judicial doctrines such as sham transaction, substance over form, and economic substance.

Persons entering into these transactions on or after November 2, 2006 must disclose. “Material advisors” who make a tax statement on or after such date with respect to transactions entered into on or after such date may then have disclosure and list maintenance obligations.

If you believe that you may have engaged in a transaction that is the same or substantially similar to the transaction described above, Federal law may require you to disclose your and other parties’ participation in this “transaction of interest” on IRS Form 8886. For more information about Federal law requirements, please contact us.

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