The IRS has updated the list of transactions that it has determined to be "listed transactions" for purposes of the disclosure and registration requirements and associated penalties. The notice updates the list of listed transactions in Notice 2004-67, 2004-2 CB 600, adding transactions identified as listed transactions in notices and other guidance released after September 24, 2004, and deleting those that the IRS has previously announced will no longer be considered listed transactions.




Notice 2009-59 , I.R.B. 2009-31, July 15, 2009.





SECTION 1. PURPOSE

This notice updates the list of transactions that have been determined by the Internal Revenue Service to be "listed transactions" for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations and §§ 6111, 6112, 6662A, 6707, 6707A, and 6708 of the Internal Revenue Code. This notice restates the list of "listed transactions" in Notice 2004-67, 2004-2 C.B. 600, and updates the list by adding transactions identified as "listed transactions" in notices and other guidance released after September 24, 2004.



SECTION 2. CURRENT LISTED TRANSACTIONS

Transactions that are the same as or substantially similar to one of the types of transactions described in the list below have been determined by the Service to be tax avoidance transactions and are "listed transactions" for purposes of § 1.6011-4(b)(2) and §§ 6111, 6112, 6662A, 6707, 6707A and 6708. As a result, taxpayers may need to disclose their participation in these listed transactions as prescribed in § 1.6011-4, and material advisors may need to disclose these transactions under § 301.6111-3 of the Procedure and Administration Regulations. Taxpayers who fail to disclose may be subject to penalties under §§ 6662A and 6707A. Material advisors who fail to disclose may be subject to penalties under § 6707. In addition, material advisors must maintain lists of advisees and other information with respect to these listed transactions pursuant to § 301.6112-1. Material advisors who fail to furnish a list as required under § 301.6112-1 may be subject to penalties under § 6708.

(1) Rev. Rul. 90-105, 1990-2 C.B. 69 (transactions in which taxpayers claim deductions for contributions to a qualified cash or deferred arrangement or matching contributions to a defined contribution plan where the contributions are attributable to compensation earned by plan participants after the end of the taxable year (identified as "listed transactions" on February 28, 2000)). See also Rev. Rul. 2002-46, 2002-2 C.B. 117 (result is the same, and transactions are substantially similar, even though the contributions are designated as satisfying a liability established before the end of the taxable year), modified by Rev. Rul. 2002-73, 2002-2 C.B. 805;

(2) Notice 95-34, 1995-1 C.B. 309 (certain trust arrangements purported to qualify as multiple employer welfare benefit funds exempt from the limits of §§ 419 and 419A (identified as "listed transactions" on February 28, 2000)). See also § 1.419A(f)(6)-1 (10 or more employer plans);

(3) Transactions substantially similar to those at issue in ASA Investerings Partnership v. Commissioner, 201 F.3d 505 (D.C. Cir. 2000), and ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998) (transactions involving contingent installment sales of securities by partnerships in order to accelerate and allocate income to a tax-indifferent partner, such as a tax-exempt entity or foreign person, and to allocate later losses to another partner (identified as "listed transactions" on February 28, 2000));

(4) Section 1.643(a)-8 (transactions involving distributions described in §1.643(a)-8 from charitable remainder trusts (identified as "listed transactions" on February 28, 2000));

(5) Notice 99-59, 1999-2 C.B. 761 (transactions involving the distribution of encumbered property in which taxpayers claim tax losses for capital outlays that they have in fact recovered (identified as "listed transactions" on February 28, 2000)). See also § 1.301-1(g);

(6) Section 1.7701(l)-3 (transactions involving fast-pay arrangements as defined in § 1.7701(l)-3(b) (identified as "listed transactions" on February 28, 2000));

(7) Rev. Rul. 2000-12, 2000-1 C.B. 744 (certain transactions involving the acquisition of two debt instruments the values of which are expected to change significantly at about the same time in opposite directions (identified as "listed transactions" on February 28, 2000));

(8) Notice 2000-44, 2000-2 C.B. 255 (transactions generating losses resulting from artificially inflating the basis of partnership interests (identified as "listed transactions" on August 11, 2000)). See also §§ 1.752-1(a), 1.752-6, and 1.752-7;

(9) Notice 2000-60, 2000-2 C.B. 568 (transactions involving the purchase of a parent corporation's stock by a subsidiary, a subsequent transfer of the purchased parent stock from the subsidiary to the parent's employees, and the eventual liquidation or sale of the subsidiary (identified as "listed transactions" on November 16, 2000));

(10) Notice 2000-61, 2000-2 C.B. 569 (transactions purporting to apply § 935 to Guamanian trusts (identified as "listed transactions" on November 21, 2000));

(11) Notice 2001-16, 2001-1 C.B. 730 (transactions involving the use of an intermediary to sell the assets of a corporation (identified as "listed transactions" on January 18, 2001)). Notice 2008-111, 2008-51 I.R.B. 1299, clarifies Notice 2001-16 and supersedes Notice 2008-20, 2008-1 C.B. 406;

(12) Notice 2001-17, 2001-1 C.B. 730 (transactions involving a loss on the sale of stock acquired in a purported § 351 transfer of a high basis asset to a corporation and the corporation's assumption of a liability that the transferor has not yet taken into account for federal income tax purposes (identified as "listed transactions" on January 18, 2001));

(13) Notice 2001-45, 2001-2 C.B. 129 (certain redemptions of stock in transactions not subject to U.S. tax in which the basis of the redeemed stock is purported to shift to a U.S. taxpayer (identified as "listed transactions" on July 26, 2001));

(14) Notice 2002-21, 2002-1 C.B. 730 (transactions involving the use of a loan assumption agreement to inflate basis in assets acquired from another party to claim losses (identified as "listed transactions" on March 18, 2002);

(15) Notice 2002-35, 2002-1 C.B. 992 (transactions involving the use of a notional principal contract to claim current deductions for periodic payments made by a taxpayer while disregarding the accrual of a right to receive offsetting payments in the future (identified as "listed transactions" on May 6, 2002)). Notice 2006-16, 2006-1 C.B. 538, clarifies and modifies Notice 2002-35;

(16) Notice 2002-50, 2002-2 C.B. 98 (transactions involving the use of a straddle, a tiered partnership structure, a transitory partner, and the absence of a § 754 election to claim a permanent noneconomic loss (identified as "listed transactions" on June 25, 2002)); Notice 2002-65, 2002-2 C.B. 690 (transactions involving the use of a straddle, an S corporation or a partnership, and one or more transitory shareholders or partners to claim a loss while deferring an offsetting gain are substantially similar to transactions described in Notice 2002-50); and Notice 2003-54, 2003-2 C.B. 363 (transactions involving the use of economically offsetting positions, one or more tax indifferent parties, and the common trust fund accounting rules of § 584 to allow a taxpayer to claim a noneconomic loss are substantially similar to transactions described in Notice 2002-50 and Notice 2002-65);

(17) Rev. Rul. 2002-69, 2002-2 C.B. 760, modifying and superseding Rev. Rul. 99-14, 1999-1 C.B. 835 (transactions in which a taxpayer purports to lease property and then purports to immediately sublease it back to the lessor (often referred to as "lease-in/lease-out" or "LILO" transactions) (identified as "listed transactions" on February 28, 2000));

(18) Rev. Rul. 2003-6, 2003-1 C.B. 286 (certain arrangements involving the transfer of employee stock ownership plans (ESOPs) that hold stock in an S corporation for the purpose of claiming eligibility for the delayed effective date of § 409(p) (identified as "listed transactions" on December 17, 2002));

(19) Notice 2003-22, 2003-1 C.B. 851 (certain arrangements involving leasing companies that have been used to avoid or evade federal income and employment taxes (identified as "listed transactions" on April 4, 2003));

(20) Notice 2003-24, 2003-1 C.B. 853 (certain arrangements that purportedly qualify as collectively-bargained welfare benefit funds excepted from the account limits of §§ 419 and 419A (identified as "listed transactions" on April 11, 2003));

(21) Notice 2003-47, 2003-2 C.B. 132 (transactions involving compensatory stock options and related persons to avoid or evade federal income and employment taxes (identified as "listed transactions" on July 1, 2003));

(22) Notice 2003-55, 2003-2 C.B. 395 (transactions in which one participant claims to realize rental or other income from property or service contracts and another participant claims the deductions related to that income (often referred to as "lease strips")), modifying and superseding Notice 95-53, 1995-2 C.B. 334 (identified as "listed transactions" on February 28, 2000);

(23) Notice 2003-77, 2003-2 C.B. 1182 (certain transactions that use contested liability trusts improperly to accelerate deductions for contested liabilities under § 461(f) (identified as "listed transactions" on November 19, 2003)). See also § 1.461-2. See Rev. Proc. 2004-31, 2004-1 C.B. 986, for procedures which taxpayers must use to change their methods of accounting for deducting under § 461(f) amounts transferred to trusts in transactions described in Notice 2003-77;

(24) Notice 2003-81, 2003-2 C.B. 1223 (certain transactions in which a taxpayer claims a loss upon the assignment of a purported § 1256 contract to a charity but fails to report the recognition of gain when the taxpayer's obligation under an offsetting non- section 1256 contract terminates (identified as "listed transactions" on December 4, 2003)). Notice 2007-71, 2007-2 C.B. 472, modified and supplemented Notice 2003-81;

(25) Notice 2004-8, 2004-1 C.B. 333 (certain transactions designed to avoid the limitations on contributions to Roth IRAs described in § 408A (identified as "listed transactions" on December 31, 2003));

(26) Rev. Rul. 2004-4, 2004-1 C.B. 414 (transactions that involve segregating the business profits of an ESOP-owned S corporation in a qualified subchapter S subsidiary, so that rank-and-file employees do not benefit from participation in the ESOP (identified as "listed transactions" on January 23, 2004));

(27) Situation 2 of Rev. Rul. 2004-20, 2004-1 C.B. 546, modifying and superseding Rev. Rul. 55-748, 1955-2 C.B. 234 (certain arrangements in which an employer deducts contributions to a qualified pension plan used to pay premiums on life insurance contracts that provide for death benefits in excess of the participant's death benefit, where under the terms of the plan, the balance of the death benefit proceeds revert to the plan as a return on investment) (identified as "listed transactions" on February 13, 2004)). See also Rev. Rul. 2004-21, 2004-1 C.B. 544, §§ 1.79-1(d)(3), 1.83-3(e) and 1.402(a)-1(a)(1) and (2), and Rev. Proc. 2005-25, 2005-1 C.B. 962, modifying and superseding Rev. Proc. 2004-16, 2004-1 C.B. 559;

(28) Notice 2004-20, 2004-1 C.B. 608 (transactions in which, pursuant to a prearranged plan, a domestic corporation purports to acquire stock in a foreign target corporation and to make an election under § 338 before selling all or substantially all of the target corporation's assets in a preplanned transaction that generates a taxable gain for foreign tax purposes (but not for U.S. tax purposes) (identified as "listed transactions" on February 17, 2004));

(29) Notice 2004-30, 2004-1 C.B. 828 (transactions in which S corporation shareholders attempt to transfer the incidence of taxation on S corporation income by purportedly donating S corporation nonvoting stock to an exempt organization while retaining the economic benefits associated with that stock (identified as "listed transactions" on April 1, 2004));

(30) Notice 2004-31, 2004-1 C.B. 830 (transactions in which corporations claim inappropriate deductions for payments made through a partnership (identified as "listed transactions" on April 1, 2004));

(31) Notice 2005-13, 2005-1 C.B. 630 (transactions in which a taxpayer enters into a purported sale-lease-back arrangement with a tax-indifferent person in which substantially all of the tax-indifferent person's payment obligations are economically defeased and the taxpayer's risk of loss from a decline, and opportunity for profit from an increase, in the value of the leased property are limited (often referred to as "sale-in/lease out" or "SILO" transactions) (identified as "listed transactions" on February 11, 2005));

(32) Notice 2007-57, 2007-2 C.B. 87 (transactions in which a U.S. taxpayer uses offsetting positions with respect to foreign currency or other property for the purpose of importing a loss, but not the corresponding gain, in determining U.S. taxable income (identified as "listed transactions" on June 20, 2007));

(33) Notice 2007-83, 2007-2 C.B. 960 (certain arrangements involving a trust or other fund described in § 419(e)(3) that is purportedly a welfare benefit fund and pays premiums on one or more life insurance policies with respect to which value is accumulated, where the employer has deducted contributions in excess of specified amounts (identified as "listed transactions" on October 17, 2007));

(34) Notice 2008-34, 2008-12 I.R.B. 645 (transactions in which a tax indifferent party contributes one or more distressed assets with a high basis and low fair market value to a trust or series of trusts and sub-trusts, and a U.S. taxpayer acquires an interest in the trust (and/or series of trusts and/or sub-trusts) for the purpose of shifting a built-in loss from the tax indifferent party to the U.S. taxpayer that has not incurred the economic loss (identified as "listed transactions" on February 27, 2008)).



SECTION 3. TRANSACTIONS NO LONGER CONSIDERED TO BE LISTED TRANSACTIONS

Transactions that are the same as, or substantially similar to, one of the types of transactions described in the list below will no longer be considered listed transactions for purposes of § 1.6011-4(b)(2) and §§ 6111 and 6112. No inference is intended, however, as to whether such transactions are otherwise subject to the disclosure requirements of § 6011, the disclosure requirements of § 6111, or the list maintenance requirements of § 6112.

(1) Transactions described in Part II of Notice 98-5, 1998-1 C.B. 334 (transactions in which the reasonably expected economic profit is insubstantial in comparison to the value of the expected foreign tax credits (identified as "listed transactions" on February 28, 2000)). Notice 2004-19, 2004-1 C.B. 606, withdrew Notice 98-5. Effective for taxable years for which the due date of the return (including extensions, whether or not actually requested) is after February 17, 2004, transactions will not be considered listed transactions for purposes of § 1.6011-4(b)(2) and § 6112 solely because they are the same as or substantially similar to the transactions or arrangements described in Part II of Notice 98-5. In addition, for offers made after February 17, 2004, transactions will not be considered listed transactions for purposes of § 6111 solely because they are the same as or substantially similar to the transactions or arrangements described in Part II of Notice 98-5.

(2) Transactions described in Notice 2002-70, 2002-2 C.B. 765 (transactions involving reinsurance arrangements between a taxpayer and the taxpayer's own reinsurance company that is subject to little or no federal income tax (identified as "listed transactions" on October 15, 2002)). Notice 2004-65, 2004-2 C.B. 599, modified Notice 2002-70 by removing the identification of transactions that are the same as, or substantially similar to, transactions described in Notice 2002-70 as listed transactions effective for taxable years for which the due date of the return (including extensions, whether or not actually requested) is after September 24, 2004.



SECTION 4. EFFECT ON OTHER NOTICES

Notice 2004-67 is supplemented and superseded. For updates to this list go to the IRS web page at www.irs.gov/businesses/corporations and click on "Abusive Tax Shelters and Transactions." Notices and other published guidance will still be used to identify transactions that have been determined by the Service to be "listed transactions."



DRAFTING INFORMATION

The principal authors of this notice are Eric P. Ingala and Michael H. Beker of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact the authors at (202) 622-3070 (not a toll-free call).



SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE TRANSACTION INFORMATION WITH RETURN.
6707A(a) IMPOSITION OF PENALTY. --Any person who fails to include on any return or statement any information with respect to a reportable transaction which is required under section 6011 to be included with such return or statement shall pay a penalty in the amount determined under subsection (b).

6707A(b) AMOUNT OF PENALTY. --

6707A(b)(1) IN GENERAL. --Except as provided in paragraph (2), the amount of the penalty under subsection (a) shall be --

6707A(b)(1)(A) $10,000 in the case of a natural person, and

6707A(b)(1)(B) $50,000 in any other case.

6707A(b)(2) LISTED TRANSACTION. --The amount of the penalty under subsection (a) with respect to a listed transaction shall be --

6707A(b)(2)(A) $100,000 in the case of a natural person, and

6707A(b)(2)(B) $200,000 in any other case.

6707A(c) DEFINITIONS. --For purposes of this section:

6707A(c)(1) REPORTABLE TRANSACTION. --The term "reportable transaction" means any transaction with respect to which information is required to be included with a return or statement because, as determined under regulations prescribed under section 6011, such transaction is of a type which the Secretary determines as having a potential for tax avoidance or evasion.

6707A(c)(2) LISTED TRANSACTION. --The term "listed transaction" means a reportable transaction which is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction for purposes of section 6011.

6707A(d) AUTHORITY TO RESCIND PENALTY. –

SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH RESPECT TO REPORTABLE TRANSACTIONS.
6708(a) IMPOSITION OF PENALTY. --

6708(a)(1) IN GENERAL. --If any person who is required to maintain a list under section 6112(a) fails to make such list available upon written request to the Secretary in accordance with section 6112(b) within 20 business days after the date of such request, such person shall pay a penalty of $10,000 for each day of such failure after such 20th day.

6708(a)(2) REASONABLE CAUSE EXCEPTION. --No penalty shall be imposed by paragraph (1) with respect to the failure on any day if such failure is due to reasonable cause.

6708(b) PENALTY IN ADDITION TO OTHER PENALTIES. --The penalty imposed by this section shall be in addition to any other penalty provided by law.


6707A(d)(1) IN GENERAL. --The Commissioner of Internal Revenue may rescind all or any portion of any penalty imposed by this section with respect to any violation if --

6707A(d)(1)(A) the violation is with respect to a reportable transaction other than a listed transaction, and

6707A(d)(1)(B) rescinding the penalty would promote compliance with the requirements of this title and effective tax administration.

6707A(d)(2) NO JUDICIAL APPEAL. --Notwithstanding any other provision of law, any determination under this subsection may not be reviewed in any judicial proceeding.

6707A(d)(3) RECORDS. --If a penalty is rescinded under paragraph (1), the Commissioner shall place in the file in the Office of the Commissioner the opinion of the Commissioner with respect to the determination, including --

6707A(d)(3)(A) a statement of the facts and circumstances relating to the violation,

6707A(d)(3)(B) the reasons for the rescission, and

6707A(d)(3)(C) the amount of the penalty rescinded.

6707A(e) PENALTY REPORTED TO SEC. --In the case of a person --

6707A(e)(1) which is required to file periodic reports under section 13 or 15(d) of the Securities Exchange Act of 1934 or is required to be consolidated with another person for purposes of such reports, and

6707A(e)(2) which --

6707A(e)(2)(A) is required to pay a penalty under this section with respect to a listed transaction,

6707A(e)(2)(B) is required to pay a penalty under section 6662A with respect to any reportable transaction at a rate prescribed under section 6662A(c), or

6707A(e)(2)(C) is required to pay a penalty under section 6662(h) with respect to any reportable transaction and would (but for section 6662A(e)(2)(B)) have been subject to penalty under section 6662A at a rate prescribed under section 6662A(c),

the requirement to pay such penalty shall be disclosed in such reports filed by such person for such periods as the Secretary shall specify. Failure to make a disclosure in accordance with the preceding sentence shall be treated as a failure to which the penalty under subsection (b)(2) applies.

6707A(f) COORDINATION WITH OTHER PENALTIES. --The penalty imposed by this section shall be in addition to any other penalty imposed by this title.

6707(a) IN GENERAL. --If a person who is required to file a return under section 6111(a) with respect to any reportable transaction --

6707(a)(1) fails to file such return on or before the date prescribed therefor, or

6707(a)(2) files false or incomplete information with the Secretary with respect to such transaction,

such person shall pay a penalty with respect to such return in the amount determined under subsection (b).

6707(b) AMOUNT OF PENALTY. --

6707(b)(1) IN GENERAL. --Except as provided in paragraph (2), the penalty imposed under subsection (a) with respect to any failure shall be $50,000.

6707(b)(2) LISTED TRANSACTIONS. --The penalty imposed under subsection (a) with respect to any listed transaction shall be an amount equal to the greater of --

6707(b)(2)(A) $200,000, or

6707(b)(2)(B) 50 percent of the gross income derived by such person with respect to aid, assistance, or advice which is provided with respect to the listed transaction before the date the return is filed under section 6111.

Subparagraph (B) shall be applied by substituting "75 percent" for "50 percent" in the case of an intentional failure or act described in subsection (a).

6707(c) RESCISSION AUTHORITY. --The provisions of section 6707A(d) (relating to authority of Commissioner to rescind penalty) shall apply to any penalty imposed under this section.

6707(d) REPORTABLE AND LISTED TRANSACTIONS. --For purposes of this section, the terms "reportable transaction" and "listed transaction" have the respective meanings given to such terms by section 6707A(c).
SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERSTATEMENTS WITH RESPECT TO REPORTABLE TRANSACTIONS.
6662A(a) IMPOSITION OF PENALTY. --If a taxpayer has a reportable transaction understatement for any taxable year, there shall be added to the tax an amount equal to 20 percent of the amount of such understatement.

6662A(b) REPORTABLE TRANSACTION UNDERSTATEMENT. --For purposes of this section --

6662A(b)(1) IN GENERAL. --The term "reportable transaction understatement" means the sum of --

6662A(b)(1)(A) the product of --

6662A(b)(1)(A)(i) the amount of the increase (if any) in taxable income which results from a difference between the proper tax treatment of an item to which this section applies and the taxpayer's treatment of such item (as shown on the taxpayer's return of tax), and

6662A(b)(1)(A)(ii) the highest rate of tax imposed by section 1 ( section 11 in the case of a taxpayer which is a corporation), and

6662A(b)(1)(B) the amount of the decrease (if any) in the aggregate amount of credits determined under subtitle A which results from a difference between the taxpayer's treatment of an item to which this section applies (as shown on the taxpayer's return of tax) and the proper tax treatment of such item.

For purposes of subparagraph (A), any reduction of the excess of deductions allowed for the taxable year over gross income for such year, and any reduction in the amount of capital losses which would (without regard to section 1211) be allowed for such year, shall be treated as an increase in taxable income.

6662A(b)(2) ITEMS TO WHICH SECTION APPLIES. --This section shall apply to any item which is attributable to --

6662A(b)(2)(A) any listed transaction, and

6662A(b)(2)(B) any reportable transaction (other than a listed transaction) if a significant purpose of such transaction is the avoidance or evasion of Federal income tax.

6662A(c) HIGHER PENALTY FOR NONDISCLOSED LISTED AND OTHER AVOIDANCE TRANSACTIONS. --Subsection (a) shall be applied by substituting "30 percent" for "20 percent" with respect to the portion of any reportable transaction understatement with respect to which the requirement of section 6664(d)(2)(A) is not met.

6662A(d) DEFINITIONS OF REPORTABLE AND LISTED TRANSACTIONS. --For purposes of this section, the terms "reportable transaction" and "listed transaction" have the respective meanings given to such terms by section 6707A(c).

6662A(e) SPECIAL RULES. --

6662A(e)(1) COORDINATION WITH PENALTIES, ETC., ON OTHER UNDERSTATEMENTS. --In the case of an understatement (as defined in section 6662(d)(2)) --

6662A(e)(1)(A) the amount of such understatement (determined without regard to this paragraph) shall be increased by the aggregate amount of reportable transaction understatements for purposes of determining whether such understatement is a substantial understatement under section 6662(d)(1), and

6662A(e)(1)(B) the addition to tax under section 6662(a) shall apply only to the excess of the amount of the substantial understatement (if any) after the application of subparagraph (A) over the aggregate amount of reportable transaction understatements.

6662A(e)(2) COORDINATION WITH OTHER PENALTIES. --

6662A(e)(2)(A) COORDINATION WITH FRAUD PENALTY. --This section shall not apply to any portion of an understatement on which a penalty is imposed under section 6663.

6662A(e)(2)(B) COORDINATION WITH GROSS VALUATION MISSTATEMENT PENALTY. --This section shall not apply to any portion of an understatement on which a penalty is imposed under section 6662 if the rate of the penalty is determined under section 6662(h).

6662A(e)(3) SPECIAL RULE FOR AMENDED RETURNS. --Except as provided in regulations, in no event shall any tax treatment included with an amendment or supplement to a return of tax be taken into account in determining the amount of any reportable transaction understatement if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.