Tax Shelters: The IRS Issues a Listing Notice for Syndicated Conservation Easements

The Internal Revenue Code provides a deduction for a qualified conservation contribution, such as an easement or an outright donation of property for conservation purposes. See I.R.C. § 170(f)(3)(B)(iii) (providing deduction for a qualified conservation contribution). There are a variety of technical requirements in place that determine whether a particular contribution of property falls within section 170(f)(3)(B)(iii). See I.R.C. § 170(h) (describing requirements for deductible donation). The government has been fairly aggressive in pursuing litigation over the requirements for a deduction. See, e.g., Mitchell v. Comm’r, 775 F.3d 1243 (10th Cir. 2015); Carroll v. Comm’r, 146 T.C. 196 (2016).… Read More

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

Listed Transactions: Section 6707A Penalties and Assessment Limitations Period.

Section 6707A of the Internal Revenue Code imposes a substantial penalty on taxpayers who fail to disclose their participation in tax avoidance transactions when they file their return. Specifically, if the taxpayer fails to include “any information with respect to a reportable transaction” required to be disclosed under Section 6011 of the Code, then a penalty of 75% of the tax savings from the transactions applies, subject to statutory minimums of $5,000 for individuals and $10,000 for entities and maximums of up to $100,000 for individuals and $200,000 for entities. I.R.C. § 6707A(a), (b). Regulations issued under Section 6011 of the Code fill in the details; among the ways a taxpayer can incur the penalty is to fail to disclose participation in a “listed transaction,” which is a transaction that is identical or substantially similar to a transaction that the IRS has previously identified as a tax avoidance scheme in published guidance.… Read More