Listed Transactions: A Look at Basket Option Contracts, Part II

basket option contractThis post continues our coverage of basket option contracts, which were recently designated as listed transactions. See Notice 2015-73, 2015-46 I.R.B. 660 (Nov. 16, 2015). As discussed, the IRS designated these contracts as listed transactions because it is concerned that the basket option contract has been used by taxpayers to defer the recognition of income and to convert ordinary income and short-term capital gain or loss into long-term capital gain or loss. 2015-46 I.R.B. at 661.

A recent Chief Counsel Advice Memorandum offers further insight into the arguments that the IRS will likely offer in challenging the tax treatment of these transactions.… Read More

Listed Transactions: A Look at Basket Option Contracts

basket option contractThe IRS recently issued a notice formally designating basket option contracts as a listed transaction, which means that the IRS views these arrangements as tax avoidance transactions. See Notice 2015-73, 2015-46 I.R.B. 660 (Nov. 16, 2015). Notice 2015-73 supersedes Notice 2015-47, 2015-30 I.R.B. 76 (July 27, 2015).

The designation of a transaction as a listed transaction has a variety of adverse consequences. First, a taxpayer who has participated in a listed transaction has an obligation to make disclosures on her tax return. Treas. Reg. § 1.6011-4(a), (b)(2). Second, material advisors are required to report their involvement in the listed transaction, and must maintain lists of their clients and provide those lists to the IRS upon demand.… Read More