Instructions For Form 8918 - 2011 (Page 2 of 6) in pdf

Tax Benefit

However, you will be treated as a

fee is $250,000. For all others, the

material advisor if you form or use an

minimum fee is $50,000.

A tax benefit includes deductions,

entity to avoid the rules of section 6111 or

exclusions from gross income,

The minimum fee includes all fees for

6112 or the penalties under section 6707

nonrecognition of gain, tax credits,

a tax strategy, for advice (whether or not

or 6708.

adjustments (or the absence of

tax advice), or for the implementation of a

adjustments) to the basis of property,

Date you became a material advisor.

transaction. Fees include payment in

status as an entity exempt from federal

whatever form paid, whether in cash or in

You are a material advisor when all of the

income taxation, and any other tax

kind, for services to analyze the

following have occurred (in no particular

consequences that may reduce a

transaction (whether or not related to the

order):

•

taxpayer’s federal tax liability by affecting

tax consequences of the transaction), for

You make a tax statement,

•

the amount, timing, character, or source

services to implement the transaction, for

You receive (or expect to receive)

of any item of income, gain, expense, loss

services to document the transaction, and

gross income in excess of the threshold

or credit.

for services to prepare tax returns to the

amount, and

•

extent return preparation fees are

The transaction is entered into by the

What is a Reportable

unreasonable. A taxpayer is treated as

taxpayer to whom or for whose benefit

Transaction?

paying fees to an advisor if the taxpayer

you provided the tax statement, or in the

A reportable transaction is a transaction

knows or should know that the amount it

case of a tax statement provided to

described in one or more of the following

pays will be paid indirectly to the advisor,

another material advisor, when the

categories. See Regulations section

such as through a referral fee or

transaction is entered into by a taxpayer

1.6011-4(b) for more information.

fee-sharing arrangement. Fees do not

to whom or for whose benefit that material

include amounts paid to a person,

advisor provided a tax statement.

Listed Transactions

including an advisor, in that person’s

Note. If a transaction that was not a

A listed transaction is a transaction that is

capacity as a party to the transaction. The

reportable transaction is identified as a

the same as or substantially similar to one

IRS will scrutinize all of the facts and

listed transaction or a transaction of

of the types of transactions that the IRS

circumstances in determining whether

interest in published guidance after the

has determined to be a tax avoidance

consideration received in connection with

occurrence of the 3 events described

transaction.

a confidential transaction constitutes fees.

above, you will be treated as becoming a

For purposes of determining the minimum

These transactions are identified by

material advisor on the date the

fee, related parties (as described in

notice, regulation, or other form of

transaction is identified as a listed

section 267(b) or 707(b)) will be treated

published guidance as a listed

transaction or a transaction of interest.

as the same individual or entity.

transaction. For existing guidance, see

You must make reasonable and good

Notice 2009-59, 2009-31 I.R.B. 170

Transactions With Contractual

faith efforts to determine when the

For updates to this list go to the IRS

Protection

taxpayer entered into the transaction,

web page at

A transaction with contractual protection

even if you stop providing services before

corporations

and click on Abusive Tax

is a transaction for which the taxpayer, or

the taxpayer enters into the transaction.

Shelters and Transactions. The IRS may

a related party (as described in sections

issue new or update the existing notice,

Post-filing advice. You are not

267(b) or 707(b)), has the right to a full

regulation, or other form of guidance that

considered to be a material advisor

refund or partial refund of fees if all or part

identifies transactions as listed

concerning a transaction if you do not

of the intended tax consequences from

transactions. You can find a notice or

make or provide a tax statement about

the transaction are not sustained. It also

ruling in the Internal Revenue Bulletin at

the transaction until after the first tax

includes a transaction for which fees are

return reflecting tax benefit(s) of the

contingent on the taxpayer’s realization of

where XX is the two-digit year and YY is

transaction is filed with the IRS. This

tax benefits from the transaction. For

the two-digit bulletin number. For

exception does not apply to you if it is

exceptions and other details, see

example, you can find Notice 2009-59,

expected the taxpayer will file a

Regulations section 1.6011-4(b)(4) and

2009-31 I.R.B. 170, at

supplemental or amended return

Rev. Proc. 2007-20, 2007-7 I.R.B. 517,

irs-irbs/irb09-31.pdf.

reflecting additional tax benefits from the

which provides a list of exceptions for this

transaction.

Confidential Transactions

type of reportable transaction.

Definitions

A confidential transaction is a transaction

Loss Transactions

that is offered to a taxpayer or related

A loss transaction is a transaction that

Transaction

party (as described in section 267(b) or

results in the taxpayer claiming a loss

707(b)) under conditions of confidentiality

A transaction includes all of the relevant

under section 165 (described later) if the

and for which the taxpayer (or related

elements of the expected tax treatment of

amount of the section 165 loss is as

party) paid an advisor a minimum fee

an investment, entity, plan, or

follows.

(defined below).

arrangement and it includes any series of

•

For individuals, at least $2 million in

steps carried out as part of a plan.

A transaction is considered to be

any single tax year or $4 million in any

offered under conditions of confidentiality

combination of tax years. (At least

Substantially Similar

if the advisor who is paid a minimum fee

$50,000 for a single tax year if the loss

A transaction is substantially similar to

places a limitation on the disclosure of the

arose from a section 988 transaction

another transaction if it is expected to

tax treatment or tax structure of the

defined in section 988(c)(1) (relating to

obtain the same or similar types of tax

transaction and the limitation on

foreign currency transactions), whether or

consequences and is either factually

disclosure protects the confidentiality of

not the loss flows through from an S

similar or based on the same or similar

the advisor’s tax strategies. The

corporation or partnership).

tax strategy.

transaction is treated as confidential even

•

For corporations (excluding S

if the conditions of confidentiality are not

Receipt of an opinion regarding the tax

corporations), at least $10 million in any

legally binding on the taxpayer. See

consequences of the transaction is not

single tax year or $20 million in any

Regulations section 1.6011-4(b)(3) for

relevant to determine if the transaction is

combination of tax years.

more information.

•

the same as or substantially similar to

For partnerships with only corporations

another transaction. The term

Minimum fee. For a corporation

(excluding S corporations) as partners

substantially similar must be broadly

(excluding S corporations), or a

(looking through any partners that are

construed in favor of disclosure. See

partnership or trust in which all of the

also partnerships), at least $10 million in

Regulations section 1.6011-4(c)(4) for

owners or beneficiaries are corporations

any single tax year or $20 million in any

examples.

(excluding S corporations), the minimum

combination of tax years, whether or not

-2-

Instructions for Form 8918 Rev. 12-2011

Instructions For Form 8918 - 2011 Page 2

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