Reportable Transactions: Reportable Transactions

The IRS might be ready to levy a $50,000 tax penalty on your business for not properly reporting

certain transactions to the IRS :

Congress has recently passed new tax laws governing both Reportable & Listed transactions. And the IRS has established a complex, detailed set of rules governing these reportable transactions. Our team is comprised of Tax Attorneys, CPAs, Ex IRS agents and the leading expert witnesses in this area of the tax law.

Taxpayers who fail to disclose a reportable transaction to the IRS are subject to a $10,000 penalty. Other non-reporting taxpayers are subject to a $50,000 penalty. The penalties are increased to $100,000 and $200,000, respectively, for other taxpayers who fail to disclose a reportable transaction that is a listed transaction.

What is a Reportable Transaction?

Reportable transactions are defined by Treasury Regulation Section 1.6011-4 and generally include the following categories of transactions:

1. Confidential Transactions with investment promoters or tax professionals.

2.Transactions with contractual protection. These are transactions with the right to a refund of fees or investment if the transaction’s intended tax consequences do not occur. They also include most contingent fee transactions.

3. Loss Transactions.These are transactions resulting in a loss under Internal Revenue Code 165 (wagering, theft, capital, worthless securities, casualty, disaster, insolvent financial institution and certain other losses) of at least:

The IRS requires disclosure apparently because some of the tax shelters it deems abusive were set up to manufacture large losses of these types.

4. Transactions of interest: These are transactions that the IRS believes have potential for tax avoidance or evasion, but for which it lacks enough information to determine whether they should be identified specifically as tax avoidance transactions (i.e., listed transactions). These include certain trusts and partnerships. Call our office to see if yours is one of these.

5. Listed transactions: These transactions (and those substantially similar) are identified by the IRS as potentially abusive and are required to be disclosed. These transactions are complex, and the IRS guidance is technical. A partial list of these transactions include:

Backdated Retirement Plan Contributions.

Purported Multiple Employer Welfare Benefit Funds.

ASA Invester Partnerships

Short-term Charitable Remainder Trusts.

"BOSS" (Bond-and-Option Sales Strategy)

Fast-pay Stock Arrangements.

Bull & Bear Note Transactions.

Improper Use of a Subsidiary to Satisfy Parent's Stock-based Compensation Obligations

Guam Trusts

Intermediary Transactions.

Foreign Leverage Investment Portfolio (FLIP) & Offshore Portfolio Investment Strategy (OPIS)

Abusive Basis-shifting Devices Using Loan Assumption Agreements (CARDs)

Abusive Straddles

Abusive ESOP/S Corporation Arrangements.

Abusive Collectively Bargained Welfare Benefit Funds.

Abusive Option Sales to Family Limited Partnerships (FLPs)/Related Parties.

Abusive Roth IRA Transactions

Abusive Use of ESOP/S Corporation Ownership.

Abusive Section 412(i) Plans with Excessive Life Insurance.

Abusive S Corporation Income Shifting Arrangements (SC2)

Abusive Trust Arrangements Utilizing Cash Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits.

Sale-in/Lease-out Arrangements.

Abusive Partnership Intercompany Financings

If You have already received an IRS audit notice or tax assessment, let our team represent you so you can Get your Life Back & Sleep at Night.

At our firm we are very selective about the cases we accept. We simply don’t take every case like other tax resolution firms just looking to make a quick buck at your expense! If we determine our expert team can help you resolve your IRS nightmare, then we will defend you from the IRS attack.

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I will solve your problem.

For a free 30 minute consultation

to determine if you qualify

to have us take your case, please

call (516) 9357346 today or

e-mail us at wallachinc@gmail.com.

1. We promise to advise you how best to resolve your tax problem.

2. If you qualify, we promise to negotiate the LOWEST possible settlement or payment allowed by the IRS.

3. FEE GUARANTEE: The fee quoted covers our complete service. This fee will not increase no matter how many hours we have to work on your case.

You will discuss your case in depth with the expert who will be responsible for solving your tax problem.

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If you are not comfortable with the plan we propose or your chances of success, you are under no obligation to proceed. You are in control. It’s your decision.

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Let the experts at Reportable-Transactions.com

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The Lance Wallach tax team
"National Society of Accountants Speaker of The Year"

68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330

www.vebaplan.com

About Lance Wallach

Lance Wallach, CLU, ChFC,
CEO & Pres. Veba Plan LLC
Website: VebaPlan.com

Lance Wallach, Managing Director, is the nation's leading expert on employee benefit plans, tax problem resolution and IRS audit defense.

Mr. Wallach is a member of the AICPA faculty of teaching professionals & a renowned national expert in many court cases. He is the author of many best selling financial & law books, including:

* "Wealth Preservation Planning" by the
National Society of Accountants

* "The CPA's Guide to Federal & Estate
Gift Taxation" published by Bisk

* The AICPA's "The team approach to Tax,
Financial & Estate planning."

* "The CPA's Guide to Life Insurance" by
Bisk CPEasy

* Avoiding Circular 230 Malpractice Traps
and Common Abusive Small Businesss Hot
spots by the AICPA, author/moderator Lance Wallach

68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330
www.vebaplan.com

Captive insurance or Section 79 plans are in big trouble.

Finance Toolbox June 2011

Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble.

In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." Insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions sold these plans. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Code imposes severe penalties for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. I have received numerous phone calls from business owners who filed and still got fined. Not only do you have to file Form 8886, but it also has to be prepared correctly. I only know of two people in the U.S. who have filed these forms properly for clients. They tell me that was after hundreds of hours of research and over 50 phones calls to various IRS personnel. The filing instructions for Form 8886 presume a timely filling. Most people file late and follow the directions for currently preparing the forms. Then the IRS fines the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the IRS.

"Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years."

Many business owners adopted 412i, 419, captive insurance and Section 79 plans based upon representations provided by insurance professionals that the plans were legitimate plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties.

The moratorium on IRS fines expired on June 1, 2010. The IRS immediately started sending out notices proposing the imposition of Section 6707A penalties along with requests for lengthy extensions of the Statute of Limitations for the purpose of assessing tax. Many of these taxpayers stopped taking deductions for contributions to these plans years ago, and are confused and upset by the IRS’s inquiry, especially when the taxpayer had previously reached a monetary settlement with the IRS regarding its deductions. Logic and common sense dictate that a penalty should not apply if the taxpayer no longer benefits from the arrangement. Treas. Reg. Sec. 1.6011-4(c)(3)(i) provides that a taxpayer has participated in a listed transaction if the taxpayer’s tax return reflects tax consequences or a tax strategy described in the published guidance identifying the transaction as a listed transaction or a transaction that is the same or substantially similar to a listed transaction.

Clearly, the primary benefit in the participation of these plans is the large tax deduction generated by such participation. Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years. While the regulations do not expand on what constitutes “reflecting the tax consequences of the strategy,” it could be argued that continued benefit from a tax deferral for a previous tax deduction is within the contemplation of a “tax consequence” of the plan strategy. Also, many taxpayers who no longer make contributions or claim tax deductions continue to pay administrative fees. Sometimes, money is taken from the plan to pay premiums to keep life insurance policies in force. In these ways, it could be argued that these taxpayers are still “contributing,” and thus still must file Form 8886.

It is clear that the extent to which a taxpayer benefits from the transaction depends on the purpose of a particular transaction as described in the published guidance that caused such transaction to be a listed transaction. Revenue Ruling 2004-20, which classifies 419(e) transactions, appears to be concerned with the employer’s contribution/deduction amount rather than the continued deferral of the income in previous years. Another important issue is that the IRS has called CPAs material advisors if they signed tax returns containing the plan, and got paid a certain amount of money for tax advice on the plan. The fine is $100,000 for the CPA, or $200,000 if the CPA is incorporated. To avoid the fine, the CPA has to properly file Form 8918.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He writes about 412(i), 419, and captive insurance plans. He speaks at more than ten conventions annually, writes for more than 20 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio's All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and Gift Taxation, as well as AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and his side has never lost a case. Visit www.taxaudit419.com for more on this subject.

The information provided herein is not intended as legal, accounting, financial, or any

other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

Contact him at:

516.938.5007,

wallachinc@gmail.com, or