What is a Listed Transaction for IRS Reporting Purposes?

What is a Listed Transaction for IRS Reporting Purposes?

What is a Listed Transaction for IRS Reporting Purposes?

What is a Listed Transaction for IRS Reporting Purposes: When it comes to international tax planning and avoidance, taxpayers can get pretty creative. In order to avoid taxpayers from slipping one past the IRS without putting the Internal Revenue Service on notice that the Taxpayer is engaged in a risky tax transaction that may be considered suspect — there are the listed transaction reporting rules. Listed Transactions are a type of reportable transaction — and are the type of transactions that are the same — or similar — to a type of transaction that the IRS has determined may be used for improper tax avoidance. These types of transactions may artificially reduce a Taxpayer’s tax liability — and the government may not agree with the Taxpayer’s tax position. As a result, the Government requires that the Taxpayer identify and report the listed transaction at the time of submitting their tax return — by submitting a Form 8886. Let’s take a brief look at how the IRS defines listed transactions — and what is required:

Listed Transactions Definition

As provided by the IRS:

      • A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction. These transactions are identified by notice, regulation, or other form of published guidance as a listed transaction.

      • For existing guidance, see Notice 2009-59, 2009-31 I.R.B. 170, available at IRS.gov/pub/irs-irbs/irb09-31.pdf. For updates to this list, go to the IRS web page at IRS.gov/businesses/ corporations/abusive-tax-shelters-andtransactions. The listed transactions will also be periodically updated in future issues of the Internal Revenue Bulletin.

      • You can find a notice or ruling in the Internal Revenue Bulletin at IRS.gov/pub/irs-irbs/irbXX-YY.pdf, where XX is the two-digit year and YY is the two-digit bulletin number. For example, you can find Notice 2009-59, 2009-31 I.R.B. 170, at IRS.gov/pub/irsirbs/irb09-31.pdf. You have participated in a listed transaction if any of the following applies.

        • Your tax return reflects tax consequences or a tax strategy described in published guidance that lists the transaction.

        • You know or have reason to know that tax benefits reflected on your tax return are derived directly or indirectly from such tax consequences or tax strategy.

        • You are in a type or class of individuals or entities that published guidance treats as participants in a listed transaction.

Exception to Listed Transaction Rules

As further provided by the IRS:

  • If you participated in a transaction that is the same as or substantially similar to the transaction described in Notice 2002-35, 2002-21 I.R.B. 992, available at IRS.gov/pub/irsirbs/irb02-21.pdf (tax avoidance using notional principal contracts), solely as a result of your direct or indirect interest in a pass-through entity, you are not required to disclose the transaction on Form 8886. For more information, see Notice 2006-16, 2006-9 I.R.B. 538, available at IRS.gov/pub/irs-irbs/ irb06-09.pdf.

Known Listed Transactions

Here is a compilation of listed transactions as provided by the Internal Revenue Service:

Listed Transactions in Chronological Order

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