Robison Law Firm

When Are Attorneys Obligated to Report their Client's Tax Motivated Transactions

Section 6707A(c) authorizes the Treasury to define a "listed transaction'' and a "reportable transaction'' under Section 6011. That is, under Section 6707A(c)(1), a reportable transaction is any transaction with respect to which information must 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. Under Section 6707A(c)(2), a listed transaction is 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. The penalty amount under Section 6707A(b) for failing to disclose a reportable transaction is $10,000 in the case of a natural person and $50,000 in any other case. However, if the failure is with respect to a listed transaction, the amount increases to $100,000 and $200,000, respectively. Section 6111(a) requires each material advisor for a reportable transaction, including a listed transaction, to timely file an information return identifying and describing the transaction, describing any potential tax benefits expected to result from it, and providing other information the Treasury may require. Section 6111(b)(1), defines a material advisor as a person who provides material aid, assistance, or advice about organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction and who directly or indirectly derives gross income over $50,000 if the tax benefits are provided to natural persons or $250,000 if the tax benefits are provided to a corporation.