Instructions For Form 8918 - Material Advisor Disclosure Statement - 2017 Page 2

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Definitions
transaction. For example, a fee does not
Confidential Transactions
include reasonable charges for the use of
A confidential transaction is a transaction
Transaction
capital or the sale or use of property.
that is offered to a taxpayer or related
A transaction includes all factual elements
The IRS will scrutinize carefully all of
party (as described in section 267(b) or
relevant to the expected tax treatment of
the facts and circumstances to determine
707(b)) under conditions of confidentiality
an investment, entity, plan, or
if consideration received or expected to be
and for which the taxpayer (or related
arrangement and it includes any series of
received in connection with a reportable
party) paid an advisor a
minimum fee
steps carried out as part of a plan.
transaction is gross income received
(defined below).
directly, or indirectly, for aid, assistance,
or advice.
Substantially Similar
A transaction is considered to be
offered under conditions of confidentiality
Employee exception. Generally, you are
A transaction is substantially similar to
if the advisor who is paid a minimum fee
not considered to be a material advisor if
another transaction if it is expected to
places a limitation on the disclosure of the
you make a tax statement solely in your
obtain the same or similar types of tax
tax treatment or tax structure of the
capacity as an employee, shareholder,
consequences and is either factually
transaction and the limitation on
partner, or agent of another person. In this
similar or based on the same or similar tax
disclosure protects the confidentiality of
case, any tax statement you make will be
strategy.
the advisor's tax strategies. The
considered to be made by your employer,
transaction is treated as confidential even
corporation, partnership, or principal.
Receipt of an opinion regarding the tax
if the conditions of confidentiality are not
consequences of the transaction is not
However, you will be treated as a
legally binding on the taxpayer. See
relevant to determine if the transaction is
material advisor if you form or use an
Regulations section 1.6011-4(b)(3) for
the same as or substantially similar to
entity to avoid the rules of section 6111 or
more information.
another transaction. The term
6112 or the penalties under section 6707
substantially similar must be broadly
Minimum fee. For a corporation
or 6708.
construed in favor of disclosure. See
(excluding S corporations), or a
Date you became a material advisor.
Regulations section 1.6011-4(c)(4) for
partnership or trust in which all of the
You are a material advisor when all of the
examples.
owners or beneficiaries are corporations
following have occurred (in no particular
(excluding S corporations), the minimum
order).
fee is $250,000. For all others, the
Tax Benefit
You make a tax statement,
minimum fee is $50,000.
A tax benefit includes deductions,
You receive (or expect to receive) gross
The minimum fee includes all fees for a
exclusions from gross income,
income in excess of the threshold amount,
tax strategy, for advice (whether or not tax
nonrecognition of gain, tax credits,
and
advice), or for the implementation of a
adjustments (or the absence of
The transaction is entered into by the
transaction. Fees include payment in
adjustments) to the basis of property,
taxpayer to whom or for whose benefit you
whatever form paid, whether in cash or in
status as an entity exempt from federal
provided the tax statement, or in the case
kind, for services to analyze the
income taxation, and any other tax
of a tax statement provided to another
transaction (whether or not related to the
consequences that may reduce a
material advisor, when the transaction is
tax consequences of the transaction), for
taxpayer's federal tax liability by affecting
entered into by a taxpayer to whom or for
services to implement the transaction, for
the amount, timing, character, or source of
whose benefit that material advisor
services to document the transaction, and
any item of income, gain, expense, loss,
provided a tax statement.
for services to prepare tax returns to the
or credit.
If a transaction that was not a
extent return preparation fees are
reportable transaction is identified as a
What Is a Reportable
unreasonable. A taxpayer is treated as
listed transaction or a transaction of
Transaction?
paying fees to an advisor if the taxpayer
interest in published guidance after the
knows or should know that the amount it
A reportable transaction is a transaction
occurrence of the 3 events described
pays will be paid indirectly to the advisor,
described in one or more of the following
above, you will be treated as becoming a
such as through a referral fee or
categories. See Regulations section
material advisor on the date the
fee-sharing arrangement. Fees do not
1.6011-4(b) for more information.
transaction is identified as a listed
include amounts paid to a person,
transaction or a transaction of interest.
including an advisor, in that person's
Listed Transactions
You must make reasonable and good
capacity as a party to the transaction. The
faith efforts to determine when the
IRS will scrutinize all of the facts and
A listed transaction is a transaction that is
taxpayer entered into the transaction,
circumstances in determining whether
the same as or substantially similar to one
even if you stop providing services before
consideration received in connection with
of the types of transactions that the IRS
the taxpayer enters into the transaction.
a confidential transaction constitutes fees.
has determined to be a tax avoidance
For purposes of determining the minimum
transaction.
Post-filing advice. You are not
fee, related parties (as described in
considered to be a material advisor
section 267(b) or 707(b)) will be treated as
These transactions are identified by
concerning a transaction if you do not
the same individual or entity.
notice, regulation, or other form of
make or provide a tax statement about the
published guidance as a listed
transaction until after the first tax return
transaction. See Notice 2009-59 for
Transactions With Contractual
reflecting tax benefit(s) of the transaction
guidance.
is filed with the IRS. This exception does
Protection
not apply to you if it is expected the
Go to
IRS.gov/Businesses/
A transaction with contractual protection is
taxpayer will file a supplemental or
Corporations/Abusive-Tax-Shelters-And-
a transaction for which the taxpayer, or a
amended return reflecting additional tax
Transactions
for the latest information and
related party (as described in sections
benefits from the transaction.
guidance.
267(b) or 707(b)), has the right to a full
refund or partial refund of fees if all or part
of the intended tax consequences from
Instructions for Form 8918 Rev. 06-2017
-2-

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