43146 Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 

responsibilities among the various 

levels of government. Accordingly, the 

agency has concluded that the rule does 

not contain policies that have 

federalism implications as defined in 

the Executive order and, consequently, 

a federalism summary impact statement 

is not required. 

V. How Does This Rule Comply with 

the Paperwork Reduction Act of 1995? 

This final rule contains no collections 

of information. Therefore, clearance by 

the Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act of 1995 is not required. The 

guidance for this final rule references 

previously approved collections of 

information found in FDA regulations. 

These collections of information are 

subject to review by the OMB under the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501–3520). 

VI. What References Are on Display? 

The following reference has been 

placed on display in the Division of 

Dockets Management (HFA–305), Food 

and Drug Administration, 5630 Fishers 

Lane, rm. 1061, Rockville, MD 20852, 

and may be seen by interested persons 

between 9 a.m. and 4 p.m., Monday 

through Friday. 

1. Petition from Tepha, Inc., on May 12, 

2006. 

List of Subjects in 21 CFR Part 878 

Medical devices. 

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs, 21 CFR part 878 is 

amended as follows: 

PART 878—GENERAL AND PLASTIC 

SURGERY DEVICES 

■ 1. The authority citation for 21 CFR 

part 878 continues to read as follows: 

Authority: 21 U.S.C. 351, 360, 360c, 360e, 

360j, 360l, 371. 

■ 2. Section 878.4494 is added to 

subpart E to read as follows: 

§ 878.4494 Absorbable 

poly(hydroxybutyrate) surgical suture 

produced by recombinant DNA technology. 

(a) Identification. An absorbable 

poly(hydroxybutyrate) surgical suture is 

an absorbable surgical suture made of 

material isolated from prokaryotic cells 

produced by recombinant 

deoxyribonucleic acid (DNA) 

technology. The device is intended for 

use in general soft tissue approximation 

and ligation. 

(b) Classification. Class II (special 

controls). The special control for this 

device is the FDA guidance document 

entitled ‘‘Class II Special Controls 

Guidance Document: Absorbable 

Poly(hydroxybutyrate) Surgical Suture 

Produced by Recombinant DNA 

Technology.’’ For the availability of this 

guidance document see § 878.1(e). 

Dated: July 23, 2007. 

Linda S. Kahan, 

Deputy Director, Center for Devices and 

Radiological Health. 

[FR Doc. E7–15064 Filed 8–2–07; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1, 20, 25, 31, 53, 54, and 

56 

[TD 9350] 

RIN 1545–BE24 

AJCA Modifications to the Section 

6011 Regulations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations under section 6011 of the 

Internal Revenue Code that modify the 

rules relating to the disclosure of 

reportable transactions under section 

6011. These regulations affect taxpayers 

participating in reportable transactions 

under section 6011, material advisors 

responsible for disclosing reportable 

transactions under section 6111, and 

material advisors responsible for 

keeping lists under section 6112. 

DATES: Effective Date: These regulations 

are effective August 3, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Charles D. Wien, Michael H. Beker, or 

Tolsun N. Waddle, 202–622–3070 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains final 

regulations that amend 26 CFR part 1 by 

modifying and clarifying the rules 

relating to the disclosure of reportable 

transactions under section 6011. This 

document also contains final regulations 

that amend 26 CFR parts 20, 25, 31, 53, 

54, and 56 by modifying the rules for 

purposes of estate, gift, employment, 

and pension and exempt organizations 

excise taxes that require the disclosure 

of listed transactions by certain 

taxpayers on their Federal tax returns 

under section 6011. 

The American Jobs Creation Act of 

2004, Public Law 108–357, (118 Stat. 

1418), (AJCA) was enacted on October 

22, 2004. The AJCA revised sections 

6111 and 6112, thereby necessitating 

changes to the rules under section 6011. 

On November 1, 2006, the IRS and 

Treasury Department issued a notice of 

proposed rulemaking and temporary 

and final regulations under sections 

6011, 6111, and 6112 (REG–103038–05, 

REG–103039–05, REG–103043–05, TD 

9295) (the November 2006 regulations). 

The November 2006 regulations were 

published in the Federal Register (71 

FR 64488, 71 FR 64496, 71 FR 64501, 

71 FR 64458) on November 2, 2006. 

The IRS and Treasury Department 

received written public comments 

responding to the proposed regulations 

and held a public hearing regarding the 

proposed rules on March 20, 2007. After 

consideration of the comments received 

and the comments made at the hearing, 

the proposed regulations are adopted as 

revised by this Treasury decision. These 

final regulations generally retain the 

provisions of the proposed regulations 

but include some modifications based 

on the recommendations made in the 

public comments. 

Summary of Comments and 

Explanation of Provisions 

Nine written comments were received 

in response to the NPRM. All comments 

were considered and are available for 

public inspection upon request. 

Transactions of Interest 

The proposed regulations identified 

transactions of interest as a new 

reportable transaction category. As 

stated in the preamble to the proposed 

regulations, a transaction of interest is a 

transaction that the IRS and Treasury 

Department believe has a potential for 

tax avoidance or evasion, but for which 

the IRS and Treasury Department lack 

enough information to determine 

whether the transaction should be 

identified specifically as a tax avoidance 

transaction. These final regulations 

adopt the language in the proposed 

regulations regarding transactions of 

interest without modification. This 

language provides that a transaction of 

interest is a transaction that is the same 

as or substantially similar to one of the 

types of transactions that the IRS has 

identified by notice, regulation, or other 

form of published guidance as a 

transaction of interest. These final 

regulations also retain the language in 

the proposed regulations that provide 

that a taxpayer’s participation in a 

transaction of interest will be 

determined in the published guidance 

which identifies the transaction of 

interest. 


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Several commentators requested more 

specificity and guidance on the 

definition of what constitutes a 

transaction of interest. Specifically, the 

commentators recommended that the 

term ‘‘participation,’’ for purposes of 

determining whether a taxpayer 

participated in a transaction of interest, 

be defined in the regulations rather than 

in the published guidance identifying 

the transaction of interest. The 

commentators also requested that the 

published guidance describing a 

transaction of interest be crafted in a 

clear and specific manner, thereby 

enabling taxpayers to determine 

whether they participated in a 

transaction of interest. One 

commentator also recommended 

providing a list of factors in the 

regulations that the IRS would consider 

when identifying a transaction of 

interest. Further, several commentators 

requested that the IRS and Treasury 

Department provide notice to taxpayers 

that the IRS and Treasury Department 

are considering designating a particular 

transaction as a transaction of interest 

and requesting comments prior to 

publishing guidance identifying a 

transaction as a transaction of interest. 

The IRS and Treasury Department 

believe that providing a specific 

definition for the transactions of interest 

category in the regulations would 

unduly limit the IRS and Treasury 

Department’s ability to identify 

transactions that have the potential for 

tax avoidance or evasion. In order to 

maintain flexibility in identifying a 

transaction of interest, the description of 

a transaction of interest will be provided 

in the published guidance that identifies 

the transaction of interest. The 

published guidance identifying a 

transaction of interest will provide 

taxpayers with the information 

necessary to determine whether a 

particular transaction is the same as or 

substantially similar to the transaction 

described in the published guidance 

and to determine who participated in 

the transaction. 

The IRS and Treasury Department do 

not believe that the regulations should 

be amended to include language 

requiring the IRS and Treasury 

Department to provide advance notice 

for transactions of interest as suggested 

by the commentators. However, the IRS 

and Treasury Department may choose to 

publish advance notice and request 

comments in certain circumstances. The 

determination of whether to provide 

advance notice and a request for 

comments will be made on a transaction 

by transaction basis. 

The proposed regulations also provide 

that upon publication of the final 

regulations, the transactions of interest 

category of reportable transaction will 

apply to transactions entered into on or 

after November 2, 2006. These final 

regulations adopt the effective date 

stated in the proposed regulations. 

The preamble to the proposed 

regulations provides that when the IRS 

and Treasury Department have gathered 

enough information to make an 

informed decision as to whether a 

particular transaction of interest is a tax 

avoidance type of transaction, the IRS 

and Treasury Department may take one 

or more actions, including removing the 

transaction from the transaction of 

interest category in published guidance, 

designating the transaction as a listed 

transaction, or providing a new category 

of reportable transaction. Several 

commentators recommended that the 

period during which a transaction may 

be considered a transaction of interest 

be limited to twenty-four months, 

unless the IRS and Treasury Department 

affirmatively act to extend the 

designation for an additional twentyfour months with no limit on the 

number of permissible extensions. One 

commentator suggested that the length 

of the period be limited to twenty-four 

months, with no extensions. 

The IRS and Treasury Department 

believe that limiting the length of time 

a transaction may be designated a 

transaction of interest would be contrary 

to the purpose of the transactions of 

interest category of reportable 

transaction and would hinder the ability 

of the IRS and Treasury Department to 

efficiently and effectively gather the 

necessary information to determine 

whether a particular transaction is a tax 

avoidance type of transaction. 

Accordingly, these final regulations do 

not adopt these suggestions. 

Disclosure of Reportable Transactions 

by Owners of a Pass-Through Entity 

I. Timing of Disclosures 

The proposed regulations provide that 

if a taxpayer who is a partner in a 

partnership, a shareholder in an S 

corporation, or a beneficiary of a trust 

receives a timely Schedule K–1 less 

than 10 calendar days before the due 

date of the taxpayer’s return (including 

extensions) and, based on receipt of the 

timely Schedule K–1, the taxpayer 

determines that the taxpayer 

participated in a reportable transaction, 

the disclosure statement will not be 

considered late if the taxpayer discloses 

the reportable transaction by filing a 

disclosure statement with the Office of 

Tax Shelter Analysis (OTSA) within 45 

calendar days after the due date of the 

taxpayer’s return (including extensions). 

Several commentators requested that the 

proposed regulations not limit relief to 

taxpayers who receive a timely 

Schedule K–1 before the due date of 

their return. Others believed the 45 day 

disclosure period was too short. One 

commentator recommended that the 

provision apply to late disclosures that 

were inadvertent or non-abusive. One 

commentator recommended that the 10 

day period be extended to 30 days and 

the 45 day disclosure period be 

extended to 90 days. With respect to the 

date the disclosure period begins, two 

commentators commented that the 

disclosure period should begin on the 

date the taxpayer receives the timely 

Schedule K–1. 

The IRS and Treasury Department 

agree that the 45 day disclosure period 

should be extended. These final 

regulations extend the disclosure period 

to 60 calendar days. The IRS and 

Treasury Department believe that this 

additional period will provide taxpayers 

with ample time to review the entity’s 

return and comply with any 

administrative and regulatory 

requirements before filing their 

disclosure statement. It should be noted 

that if a taxpayer receives a timely 

Schedule K–1 after the due date of the 

taxpayer’s return (including extensions), 

the taxpayer will have received the 

timely Schedule K–1 less than 10 

calendar days before the due date of the 

return and will have 60 calendar days 

after the due date of the taxpayer’s 

return (including extensions) to file the 

disclosure statement. 

II. Pass-Through Owners 

Several commentators have suggested 

that the disclosure obligations of owners 

of a pass-through entity that participates 

in a reportable transaction be amended 

to provide that only certain owners of 

the pass-through entity are required to 

disclose their participation in the 

reportable transaction. One 

commentator suggested that an owner of 

a pass-through entity should be 

removed from this disclosure obligation 

when (1) the owner did not know and 

should not have known that the passthrough entity engaged in the reportable 

transaction; and (2) the pass-through 

entity failed to disclose timely its 

participation in the reportable 

transaction on its return to OTSA. The 

commentator also recommends that if 

the owner knew or reasonably should 

have known of the pass-through entity’s 

participation in the reportable 

transaction, the owner should be 

required to file a disclosure statement 

even if the pass-through entity did not 

disclose the transaction to the owner. A 

different commentator suggested that an 


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owner of a pass-through entity not be 

required to disclose the owner’s 

participation in a reportable transaction, 

even if the owner knew or should have 

known of the pass-through entity’s 

participation in the reportable 

transaction. 

Several commentators also suggested 

adopting a de minimis ownership rule 

exempting taxpayers owning less than a 

certain percentage of the pass-through 

entity from the disclosure requirements. 

One commentator suggested exempting 

owners of 5 percent or less of the 

outstanding interests in the passthrough entity that participates in a 

reportable transaction. 

The IRS and Treasury Department are 

aware that certain partners, 

shareholders, and beneficiaries may file 

income tax returns that reflect the tax 

consequences, tax benefits, or tax 

strategy of a reportable transaction even 

though the taxpayer is unaware that the 

pass-through entity engaged in the 

reportable transaction. The IRS and 

Treasury Department recognize the 

concerns of the commentators. In light 

of the potential monetary penalties for 

failing to disclose participation in a 

reportable transaction and in order to 

maintain flexibility in determining who 

should be subject to the disclosure 

requirements for a particular 

transaction, these final regulations 

amend the proposed regulations to add 

language providing flexibility to the IRS 

and Treasury Department to issue other 

provisions for disclosure under 

§ 1.6011–4 in published guidance. 

Time Period for Disclosing Participation 

in a Listed Transaction and Transaction 

of Interest 

Under the proposed regulations if a 

transaction becomes a listed transaction 

or a transaction of interest after the 

filing of a taxpayer’s tax return 

(including an amended return) 

reflecting the taxpayer’s participation in 

the listed transaction or transaction of 

interest and before the end of the period 

of limitations for assessment of tax for 

any taxable year in which the taxpayer 

participated in the listed transaction or 

transaction of interest, then a disclosure 

statement must be filed, regardless of 

whether the taxpayer participated in the 

listed transaction or transaction of 

interest in the year the transaction 

became a listed transaction or a 

transaction of interest, with OTSA 

within 60 calendar days after the date 

on which the transaction became a 

listed transaction or a transaction of 

interest. The proposed regulations also 

provide that the Commissioner may 

determine the time for disclosure of 

listed transactions and transactions of 

interest in the published guidance 

identifying the transaction. 

Many commentators suggested that 

the current rule, which requires the 

disclosure of subsequently identified 

listed transactions on the taxpayer’s 

next filed tax return be retained in light 

of the potential monetary penalties and 

potential administrative burden due to 

the shortened disclosure period. One 

commentator recommended that the 

taxpayer be required to file the 

disclosure statement by the later of the 

taxpayer’s next filed tax return or within 

60 calendar days after the date on which 

the transaction becomes a listed 

transaction or transaction of interest. 

A critical factor in the ability to 

analyze a particular transaction is the 

ability to have the necessary 

information available in a timely 

manner. Thus, requiring taxpayers to 

file a disclosure statement with OTSA 

in a timely manner is essential. Because 

the IRS and Treasury Department 

recognize that compliance within 60 

calendar days may be burdensome in 

certain circumstances, the proposed 

regulations are amended to provide that 

taxpayers have 90 calendar days to 

disclose their participation in a 

subsequently identified listed 

transaction or transaction of interest. 

Brief Asset Holding Period Reportable 

Transaction Category 

Due to changes in section 901 and 

based on comments received, the IRS 

and Treasury Department have 

determined that the brief asset holding 

period reportable transaction category is 

no longer necessary. These final 

regulations therefore remove this 

category as a reportable transaction 

category. 

Form 8271 

Before the enactment of the AJCA, 

section 6111 provided that tax shelter 

organizers were required to provide 

investors in tax shelters the registration 

number for the tax shelter. Section 

301.6111–1T, Q&A 55, requires 

investors to report the registration 

number of the tax shelter to the IRS on 

Form 8271, ‘‘Investor Reporting of Tax 

Shelter Registration Number’’, and 

attach the Form 8271 to any return on 

which any deduction, loss, credit, or 

other tax benefit attributable to the tax 

shelter is claimed. Because only a few 

investors must still file Form 8271 for 

pre-AJCA section 6111 tax shelters and 

because the IRS already is aware of 

these transactions, the IRS and Treasury 

Department have decided that investors 

are no longer required to file Forms 

8271 otherwise due on or after August 

3, 2007. The Form 8271 will be 

obsoleted. Taxpayers required to file 

Form 8886, ‘‘Reportable Transaction 

Disclosure Statement’’, pursuant to 

§ 1.6011–4(d), and Form 8271 with 

respect to the same transaction only 

need to report the registration number 

on Form 8886. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and because these 

regulations do not impose a collection 

of information on small entities, the 

provisions of the Regulatory Flexibility 

Act (5 U.S.C. chapter 35) do not apply. 

The disclosure statement referenced in 

these regulations has been made 

available for public comment and any 

update to the disclosure statement will 

be made available for public comment 

in accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

chapter 35). Pursuant to section 7805(f) 

of the Internal Revenue Code, the notice 

of proposed rulemaking preceding these 

regulations was submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

Drafting Information 

The principal authors of these 

regulations are Charles D. Wien, 

Michael H. Beker, and Tolsun N. 

Waddle, Office of the Associate Chief 

Counsel (Passthroughs and Special 

Industries). However, other personnel 

from the IRS and Treasury Department 

participated in their development. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 20 

Estate taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 25 

Gift taxes, Reporting and 

recordkeeping requirements. 

26 CFR Part 31 

Employment taxes, Income taxes, 

Penalties, Pensions, Railroad retirement, 

Reporting and recordkeeping 

requirements, Social security, 

Unemployment compensation. 


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Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 43149 

26 CFR Part 53 

Excise taxes, Foundations, 

Investments, Lobbying, Reporting and 

recordkeeping requirements. 

26 CFR Part 54 

Excise taxes, Pensions, Reporting and 

recordkeeping requirements. 

26 CFR Part 56 

Excise taxes, Lobbying, Nonprofit 

organizations, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

■ Accordingly, 26 CFR parts 1, 20, 25, 

31, 53, 54, and 56 are amended as 

follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 continues to read, in part, as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 2. Section 1.6011–4 is revised to 

read as follows: 

§ 1.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. Every taxpayer that has 

participated, as described in paragraph 

(c)(3) of this section, in a reportable 

transaction within the meaning of 

paragraph (b) of this section and who is 

required to file a tax return must file 

within the time prescribed in paragraph 

(e) of this section a disclosure statement 

in the form prescribed by paragraph (d) 

of this section. The fact that a 

transaction is a reportable transaction 

shall not affect the legal determination 

of whether the taxpayer’s treatment of 

the transaction is proper. 

(b) Reportable transactions—(1) In 

general. A reportable transaction is a 

transaction described in any of the 

paragraphs (b)(2) through (7) of this 

section. The term transaction includes 

all of the factual elements relevant to 

the expected tax treatment of any 

investment, entity, plan, or 

arrangement, and includes any series of 

steps carried out as part of a plan. 

(2) Listed transactions. A listed 

transaction is a transaction that is the 

same as or substantially similar to one 

of the types of transactions that the 

Internal Revenue Service (IRS) has 

determined to be a tax avoidance 

transaction and identified by notice, 

regulation, or other form of published 

guidance as a listed transaction. 

(3) Confidential transactions—(i) In 

general. A confidential transaction is a 

transaction that is offered to a taxpayer 

under conditions of confidentiality and 

for which the taxpayer has paid an 

advisor a minimum fee. 

(ii) Conditions of confidentiality. A 

transaction is considered to be offered to 

a taxpayer under conditions of 

confidentiality if the advisor who is 

paid the minimum fee places a 

limitation on disclosure by the taxpayer 

of the tax treatment or tax structure of 

the transaction and the limitation on 

disclosure protects the confidentiality of 

that advisor’s tax strategies. A 

transaction is treated as confidential 

even if the conditions of confidentiality 

are not legally binding on the taxpayer. 

A claim that a transaction is proprietary 

or exclusive is not treated as a limitation 

on disclosure if the advisor confirms to 

the taxpayer that there is no limitation 

on disclosure of the tax treatment or tax 

structure of the transaction. 

(iii) Minimum fee. For purposes of 

this paragraph (b)(3), the minimum fee 

is—

(A) $250,000 for a transaction if the 

taxpayer is a corporation; 

(B) $50,000 for all other transactions 

unless the taxpayer is a partnership or 

trust, all of the owners or beneficiaries 

of which are corporations (looking 

through any partners or beneficiaries 

that are themselves partnerships or 

trusts), in which case the minimum fee 

is $250,000. 

(iv) Determination of minimum fee. 

For purposes of this paragraph (b)(3), in 

determining the minimum fee, all fees 

for a tax strategy or for services for 

advice (whether or not tax advice) or for 

the implementation of a transaction are 

taken into account. Fees include 

consideration in whatever form paid, 

whether in cash or in kind, for services 

to analyze the transaction (whether or 

not related to the tax consequences of 

the transaction), for services to 

implement the transaction, for services 

to document the transaction, and for 

services to prepare tax returns to the 

extent return preparation fees are 

unreasonable in light of the facts and 

circumstances. For purposes of this 

paragraph (b)(3), a taxpayer also is 

treated as paying fees to an advisor if 

the taxpayer knows or should know that 

the amount it pays will be paid 

indirectly to the advisor, such as 

through a referral fee or fee-sharing 

arrangement. A fee does not include 

amounts paid to a person, including an 

advisor, in that person’s capacity as a 

party to the transaction. For example, a 

fee does not include reasonable charges 

for the use of capital or the sale or use 

of property. The IRS will scrutinize 

carefully all of the facts and 

circumstances in determining whether 

consideration received in connection 

with a confidential transaction 

constitutes fees. 

(v) Related parties. For purposes of 

this paragraph (b)(3), persons who bear 

a relationship to each other as described 

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

treated as the same person. 

(4) Transactions with contractual 

protection—(i) In general. A transaction 

with contractual protection is a 

transaction for which the taxpayer or a 

related party (as described in section 

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

or partial refund of fees (as described in 

paragraph (b)(4)(ii) of this section) if all 

or part of the intended tax consequences 

from the transaction are not sustained. 

A transaction with contractual 

protection also is a transaction for 

which fees (as described in paragraph 

(b)(4)(ii) of this section) are contingent 

on the taxpayer’s realization of tax 

benefits from the transaction. All the 

facts and circumstances relating to the 

transaction will be considered when 

determining whether a fee is refundable 

or contingent, including the right to 

reimbursements of amounts that the 

parties to the transaction have not 

designated as fees or any agreement to 

provide services without reasonable 

compensation. 

(ii) Fees. Paragraph (b)(4)(i) of this 

section only applies with respect to fees 

paid by or on behalf of the taxpayer or 

a related party to any person who makes 

or provides a statement, oral or written, 

to the taxpayer or related party (or for 

whose benefit a statement is made or 

provided to the taxpayer or related 

party) as to the potential tax 

consequences that may result from the 

transaction. 

(iii) Exceptions—(A) Termination of 

transaction. A transaction is not 

considered to have contractual 

protection solely because a party to the 

transaction has the right to terminate the 

transaction upon the happening of an 

event affecting the taxation of one or 

more parties to the transaction. 

(B) Previously reported transaction. If 

a person makes or provides a statement 

to a taxpayer as to the potential tax 

consequences that may result from a 

transaction only after the taxpayer has 

entered into the transaction and 

reported the consequences of the 

transaction on a filed tax return, and the 

person has not previously received fees 

from the taxpayer relating to the 

transaction, then any refundable or 

contingent fees are not taken into 

account in determining whether the 

transaction has contractual protection. 

This paragraph (b)(4) does not provide 

any substantive rules regarding when a 

person may charge refundable or 

contingent fees with respect to a 


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43150 Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 

transaction. See Circular 230, 31 CFR 

part 10, for the regulations governing 

practice before the IRS. 

(5) Loss transactions—(i) In general. A 

loss transaction is any transaction 

resulting in the taxpayer claiming a loss 

under section 165 of at least—

(A) $10 million in any single taxable 

year or $20 million in any combination 

of taxable years for corporations; 

(B) $10 million in any single taxable 

year or $20 million in any combination 

of taxable years for partnerships that 

have only corporations as partners 

(looking through any partners that are 

themselves partnerships), whether or 

not any losses flow through to one or 

more partners; or 

(C) $2 million in any single taxable 

year or $4 million in any combination 

of taxable years for all other 

partnerships, whether or not any losses 

flow through to one or more partners; 

(D) $2 million in any single taxable 

year or $4 million in any combination 

of taxable years for individuals, S 

corporations, or trusts, whether or not 

any losses flow through to one or more 

shareholders or beneficiaries; or 

(E) $50,000 in any single taxable year 

for individuals or trusts, whether or not 

the loss flows through from an S 

corporation or partnership, if the loss 

arises with respect to a section 988 

transaction (as defined in section 

988(c)(1) relating to foreign currency 

transactions). 

(ii) Cumulative losses. In determining 

whether a transaction results in a 

taxpayer claiming a loss that meets the 

threshold amounts over a combination 

of taxable years as described in 

paragraph (b)(5)(i) of this section, only 

losses claimed in the taxable year that 

the transaction is entered into and the 

five succeeding taxable years are 

combined. 

(iii) Section 165 loss—(A) For 

purposes of this section, in determining 

the thresholds in paragraph (b)(5)(i) of 

this section, the amount of a section 165 

loss is adjusted for any salvage value 

and for any insurance or other 

compensation received. See § 1.165–

1(c)(4). However, a section 165 loss does 

not take into account offsetting gains, or 

other income or limitations. For 

example, a section 165 loss does not 

take into account the limitation in 

section 165(d) (relating to wagering 

losses) or the limitations in sections 

165(f), 1211, and 1212 (relating to 

capital losses). The full amount of a 

section 165 loss is taken into account for 

the year in which the loss is sustained, 

regardless of whether all or part of the 

loss enters into the computation of a net 

operating loss under section 172 or a net 

capital loss under section 1212 that is a 

carryback or carryover to another year. 

A section 165 loss does not include any 

portion of a loss, attributable to a capital 

loss carryback or carryover from another 

year, that is treated as a deemed capital 

loss under section 1212. 

(B) For purposes of this section, a 

section 165 loss includes an amount 

deductible pursuant to a provision that 

treats a transaction as a sale or other 

disposition, or otherwise results in a 

deduction under section 165. A section 

165 loss includes, for example, a loss 

resulting from a sale or exchange of a 

partnership interest under section 741 

and a loss resulting from a section 988 

transaction. 

(6) Transactions of interest. A 

transaction of interest is a transaction 

that is the same as or substantially 

similar to one of the types of 

transactions that the IRS has identified 

by notice, regulation, or other form of 

published guidance as a transaction of 

interest. 

(7) [Reserved]. 

(8) Exceptions—(i) In general. A 

transaction will not be considered a 

reportable transaction, or will be 

excluded from any individual category 

of reportable transaction under 

paragraphs (b)(3) through (7) of this 

section, if the Commissioner makes a 

determination by published guidance 

that the transaction is not subject to the 

reporting requirements of this section. 

The Commissioner may make a 

determination by individual letter 

ruling under paragraph (f) of this section 

that an individual letter ruling request 

on a specific transaction satisfies the 

reporting requirements of this section 

with regard to that transaction for the 

taxpayer who requests the individual 

letter ruling. 

(ii) Special rule for RICs. For purposes 

of this section, a regulated investment 

company (RIC) as defined in section 851 

or an investment vehicle that is owned 

95 percent or more by one or more RICs 

at all times during the course of the 

transaction is not required to disclose a 

transaction that is described in any of 

paragraphs (b)(3) through (5) and (b)(7) 

of this section unless the transaction is 

also a listed transaction or a transaction 

of interest. 

(c) Definitions. For purposes of this 

section, the following definitions apply: 

(1) Taxpayer. The term taxpayer 

means any person described in section 

7701(a)(1), including S corporations. 

Except as otherwise specifically 

provided in this section, the term 

taxpayer also includes an affiliated 

group of corporations that joins in the 

filing of a consolidated return under 

section 1501. 

(2) Corporation. When used 

specifically in this section, the term 

corporation means an entity that is 

required to file a return for a taxable 

year on any 1120 series form, or 

successor form, excluding S 

corporations. 

(3) Participation—(i) In general—(A) 

Listed transactions. 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 that lists the 

transaction under paragraph (b)(2) of 

this section. A taxpayer also has 

participated in a listed transaction if the 

taxpayer knows or has reason to know 

that the taxpayer’s tax benefits are 

derived directly or indirectly from tax 

consequences or a tax strategy described 

in published guidance that lists a 

transaction under paragraph (b)(2) of 

this section. Published guidance may 

identify other types or classes of persons 

that will be treated as participants in a 

listed transaction. Published guidance 

also may identify types or classes of 

persons that will not be treated as 

participants in a listed transaction. 

(B) Confidential transactions. A 

taxpayer has participated in a 

confidential transaction if the taxpayer’s 

tax return reflects a tax benefit from the 

transaction and the taxpayer’s 

disclosure of the tax treatment or tax 

structure of the transaction is limited in 

the manner described in paragraph 

(b)(3) of this section. If a partnership’s, 

S corporation’s or trust’s disclosure is 

limited, and the partner’s, shareholder’s, 

or beneficiary’s disclosure is not 

limited, then the partnership, S 

corporation, or trust, and not the 

partner, shareholder, or beneficiary, has 

participated in the confidential 

transaction. 

(C) Transactions with contractual 

protection. A taxpayer has participated 

in a transaction with contractual 

protection if the taxpayer’s tax return 

reflects a tax benefit from the 

transaction and, as described in 

paragraph (b)(4) of this section, the 

taxpayer has the right to the full or 

partial refund of fees or the fees are 

contingent. If a partnership, S 

corporation, or trust has the right to a 

full or partial refund of fees or has a 

contingent fee arrangement, and the 

partner, shareholder, or beneficiary does 

not individually have the right to the 

refund of fees or a contingent fee 

arrangement, then the partnership, S 

corporation, or trust, and not the 

partner, shareholder, or beneficiary, has 

participated in the transaction with 

contractual protection. 

(D) Loss transactions. A taxpayer has 

participated in a loss transaction if the 


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taxpayer’s tax return reflects a section 

165 loss and the amount of the section 

165 loss equals or exceeds the threshold 

amount applicable to the taxpayer as 

described in paragraph (b)(5)(i) of this 

section. If a taxpayer is a partner in a 

partnership, shareholder in an S 

corporation, or beneficiary of a trust and 

a section 165 loss as described in 

paragraph (b)(5) of this section flows 

through the entity to the taxpayer 

(disregarding netting at the entity level), 

the taxpayer has participated in a loss 

transaction if the taxpayer’s tax return 

reflects a section 165 loss and the 

amount of the section 165 loss that 

flows through to the taxpayer equals or 

exceeds the threshold amounts 

applicable to the taxpayer as described 

in paragraph (b)(5)(i) of this section. For 

this purpose, a tax return is deemed to 

reflect the full amount of a section 165 

loss described in paragraph (b)(5) of this 

section allocable to the taxpayer under 

this paragraph (c)(3)(i)(D), regardless of 

whether all or part of the loss enters into 

the computation of a net operating loss 

under section 172 or net capital loss 

under section 1212 that the taxpayer 

may carry back or carry over to another 

year. 

(E) Transactions of interest. A 

taxpayer has participated in a 

transaction of interest if the taxpayer is 

one of the types or classes of persons 

identified as participants in the 

transaction in the published guidance 

describing the transaction of interest. 

(F) [Reserved]. 

(G) Shareholders of foreign 

corporations—(1) In general. A 

reporting shareholder of a foreign 

corporation participates in a transaction 

described in paragraphs (b)(2) through 

(5) and (b)(7) of this section if the 

foreign corporation would be 

considered to participate in the 

transaction under the rules of this 

paragraph (c)(3) if it were a domestic 

corporation filing a tax return that 

reflects the items from the transaction. 

A reporting shareholder of a foreign 

corporation participates in a transaction 

described in paragraph (b)(6) of this 

section only if the published guidance 

identifying the transaction includes the 

reporting shareholder among the types 

or classes of persons identified as 

participants. A reporting shareholder 

(and any successor in interest) is 

considered to participate in a 

transaction under this paragraph 

(c)(3)(i)(G) only for its first taxable year 

with or within which ends the first 

taxable year of the foreign corporation 

in which the foreign corporation 

participates in the transaction, and for 

the reporting shareholder’s five 

succeeding taxable years. 

(2) Reporting shareholder. The term 

reporting shareholder means a United 

States shareholder (as defined in section 

951(b)) in a controlled foreign 

corporation (as defined in section 957) 

or a 10 percent shareholder (by vote or 

value) of a qualified electing fund (as 

defined in section 1295). 

(ii) Examples. The following 

examples illustrate the provisions of 

paragraph (c)(3)(i) of this section: 

Example 1. Notice 2003–55 (2003–2 CB 

395), which modified and superseded Notice 

95–53 (1995–2 CB 334) (see § 601.601(d)(2) of 

this chapter), describes a lease stripping 

transaction in which one party (the 

transferor) assigns the right to receive future 

payments under a lease of tangible property 

and treats the amount realized from the 

assignment as its current income. The 

transferor later transfers the property subject 

to the lease in a transaction intended to 

qualify as a transferred basis transaction, for 

example, a transaction described in section 

351. The transferee corporation claims the 

deductions associated with the high basis 

property subject to the lease. The transferor’s 

and transferee corporation’s tax returns 

reflect tax positions described in Notice 

2003–55. Therefore, the transferor and 

transferee corporation have participated in 

the listed transaction. In the section 351 

transaction, the transferor will have received 

stock with low value and high basis from the 

transferee corporation. If the transferor 

subsequently transfers the high basis/low 

value stock to a taxpayer in another 

transaction intended to qualify as a 

transferred basis transaction and the taxpayer 

uses the stock to generate a loss, and if the 

taxpayer knows or has reason to know that 

the tax loss claimed was derived indirectly 

from the lease stripping transaction, then the 

taxpayer has participated in the listed 

transaction. Accordingly, the taxpayer must 

disclose the transaction and the manner of 

the taxpayer’s participation in the transaction 

under the rules of this section. For purposes 

of this example, if a bank lends money to the 

transferor, transferee corporation, or taxpayer 

for use in their transactions, the bank has not 

participated in the listed transaction because 

the bank’s tax return does not reflect tax 

consequences or a tax strategy described in 

the listing notice (nor does the bank’s tax 

return reflect a tax benefit derived from tax 

consequences or a tax strategy described in 

the listing notice) nor is the bank described 

as a participant in the listing notice. 

Example 2. XYZ is a limited liability 

company treated as a partnership for tax 

purposes. X, Y, and Z are members of XYZ. 

X is an individual, Y is an S corporation, and 

Z is a partnership. XYZ enters into a 

confidential transaction under paragraph 

(b)(3) of this section. XYZ and X are bound 

by the confidentiality agreement, but Y and 

Z are not bound by the agreement. As a result 

of the transaction, XYZ, X, Y, and Z all 

reflect a tax benefit on their tax returns. 

Because XYZ’s and X’s disclosure of the tax 

treatment and tax structure are limited in the 

manner described in paragraph (b)(3) of this 

section and their tax returns reflect a tax 

benefit from the transaction, both XYZ and 

X have participated in the confidential 

transaction. Neither Y nor Z has participated 

in the confidential transaction because they 

are not subject to the confidentiality 

agreement. 

Example 3. P, a corporation, has an 80% 

partnership interest in PS, and S, an 

individual, has a 20% partnership interest in 

PS. P, S, and PS are calendar year taxpayers. 

In 2006, PS enters into a transaction and 

incurs a section 165 loss (that does not meet 

any of the exceptions to a section 165 loss 

identified in published guidance) of $12 

million and offsetting gain of $3 million. On 

PS’ 2006 tax return, PS includes the section 

165 loss and the corresponding gain. PS must 

disclose the transaction under this section 

because PS’ section 165 loss of $12 million 

is equal to or greater than $2 million. P is 

allocated $9.6 million of the section 165 loss 

and $2.4 million of the offsetting gain. P does 

not have to disclose the transaction under 

this section because P’s section 165 loss of 

$9.6 million is not equal to or greater than 

$10 million. S is allocated $2.4 million of the 

section 165 loss and $600,000 of the 

offsetting gain. S must disclose the 

transaction under this section because S’s 

section 165 loss of $2.4 million is equal to 

or greater than $2 million. 

(4) Substantially similar. The term 

substantially similar includes any 

transaction that is expected to obtain the 

same or similar types of tax 

consequences and that is either factually 

similar or based on the same or similar 

tax strategy. Receipt of an opinion 

regarding the tax consequences of the 

transaction is not relevant to the 

determination of whether the 

transaction is the same as or 

substantially similar to another 

transaction. Further, the term 

substantially similar must be broadly 

construed in favor of disclosure. For 

example, a transaction may be 

substantially similar to a listed 

transaction even though it involves 

different entities or uses different 

Internal Revenue Code provisions. (See 

for example, Notice 2003–54 (2003–2 

CB 363), describing a transaction 

substantially similar to the transactions 

in Notice 2002–50 (2002–2 CB 98), and 

Notice 2002–65 (2002–2 CB 690).) The 

following examples illustrate situations 

where a transaction is the same as or 

substantially similar to a listed 

transaction under paragraph (b)(2) of 

this section. (Such transactions may also 

be reportable transactions under 

paragraphs (b)(3) through (7) of this 

section.) See § 601.601(d)(2)(ii)(b) of this 

chapter. The following examples 

illustrate the provisions of this 

paragraph (c)(4): 

Example 1. Notice 2000–44 (2000–2 CB 

255) (see § 601.601(d)(2)(ii)(b) of this 

chapter), sets forth a listed transaction 

involving offsetting options transferred to a 

partnership where the taxpayer claims basis 


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in the partnership for the cost of the 

purchased options but does not adjust basis 

under section 752 as a result of the 

partnership’s assumption of the taxpayer’s 

obligation with respect to the options. 

Transactions using short sales, futures, 

derivatives or any other type of offsetting 

obligations to inflate basis in a partnership 

interest would be the same as or substantially 

similar to the transaction described in Notice 

2000–44. Moreover, use of the inflated basis 

in the partnership interest to diminish gain 

that would otherwise be recognized on the 

transfer of a partnership asset would also be 

the same as or substantially similar to the 

transaction described in Notice 2000–44. See 

§ 601.601(d)(2)(ii)(b). 

Example 2. Notice 2001–16 (2001–1 CB 

730) (see § 601.601(d)(2)(ii)(b) of this 

chapter), sets forth a listed transaction 

involving a seller (X) who desires to sell 

stock of a corporation (T), an intermediary 

corporation (M), and a buyer (Y) who desires 

to purchase the assets (and not the stock) of 

T. M agrees to facilitate the sale to prevent 

the recognition of the gain that T would 

otherwise report. Notice 2001–16 describes 

M as a member of a consolidated group that 

has a loss within the group or as a party not 

subject to tax. Transactions utilizing different 

intermediaries to prevent the recognition of 

gain would be the same as or substantially 

similar to the transaction described in Notice 

2001–16. An example is a transaction in 

which M is a corporation that does not file 

a consolidated return but which buys T 

stock, liquidates T, sells assets of T to Y, and 

offsets the gain on the sale of those assets 

with currently generated losses. See 

§ 601.601(d)(2)(ii)(b). 

(5) Tax. The term tax means Federal 

income tax. 

(6) Tax benefit. A tax benefit includes 

deductions, exclusions from gross 

income, nonrecognition of gain, tax 

credits, adjustments (or the absence of 

adjustments) to the basis of property, 

status as an entity exempt from Federal 

income taxation, and any other tax 

consequences that may reduce a 

taxpayer’s Federal income tax liability 

by affecting the amount, timing, 

character, or source of any item of 

income, gain, expense, loss, or credit. 

(7) Tax return. The term tax return 

means a Federal income tax return and 

a Federal information return. 

(8) Tax treatment. The tax treatment 

of a transaction is the purported or 

claimed Federal income tax treatment of 

the transaction. 

(9) Tax structure. The tax structure of 

a transaction is any fact that may be 

relevant to understanding the purported 

or claimed Federal income tax treatment 

of the transaction. 

(d) Form and content of disclosure 

statement. A taxpayer required to file a 

disclosure statement under this section 

must file a completed Form 8886, 

‘‘Reportable Transaction Disclosure 

Statement’’ (or a successor form), in 

accordance with this paragraph (d) and 

the instructions to the form. The Form 

8886 (or a successor form) is the 

disclosure statement required under this 

section. The form must be attached to 

the appropriate tax return(s) as provided 

in paragraph (e) of this section. If a copy 

of a disclosure statement is required to 

be sent to the Office of Tax Shelter 

Analysis (OTSA) under paragraph (e) of 

this section, it must be sent in 

accordance with the instructions to the 

form. To be considered complete, the 

information provided on the form must 

describe the expected tax treatment and 

all potential tax benefits expected to 

result from the transaction, describe any 

tax result protection (as defined in 

§ 301.6111–3(c)(12) of this chapter) with 

respect to the transaction, and identify 

and describe the transaction in 

sufficient detail for the IRS to be able to 

understand the tax structure of the 

reportable transaction and the identity 

of all parties involved in the transaction. 

An incomplete Form 8886 (or a 

successor form) containing a statement 

that information will be provided upon 

request is not considered a complete 

disclosure statement. If the form is not 

completed in accordance with the 

provisions in this paragraph (d) and the 

instructions to the form, the taxpayer 

will not be considered to have complied 

with the disclosure requirements of this 

section. If a taxpayer receives one or 

more reportable transaction numbers for 

a reportable transaction, the taxpayer 

must include the reportable transaction 

number(s) on the Form 8886 (or a 

successor form). See § 301.6111–3(d)(2) 

of this chapter. 

(e) Time of providing disclosure—(1) 

In general. The disclosure statement for 

a reportable transaction must be 

attached to the taxpayer’s tax return for 

each taxable year for which a taxpayer 

participates in a reportable transaction. 

In addition, a disclosure statement for a 

reportable transaction must be attached 

to each amended return that reflects a 

taxpayer’s participation in a reportable 

transaction. A copy of the disclosure 

statement must be sent to OTSA at the 

same time that any disclosure statement 

is first filed by the taxpayer pertaining 

to a particular reportable transaction. If 

a reportable transaction results in a loss 

which is carried back to a prior year, the 

disclosure statement for the reportable 

transaction must be attached to the 

taxpayer’s application for tentative 

refund or amended tax return for that 

prior year. In the case of a taxpayer that 

is a partner in a partnership, a 

shareholder in an S corporation, or a 

beneficiary of a trust, the disclosure 

statement for a reportable transaction 

must be attached to the partnership, S 

corporation, or trust’s tax return for each 

taxable year in which the partnership, S 

corporation, or trust participates in the 

transaction under the rules of paragraph 

(c)(3)(i) of this section. If a taxpayer who 

is a partner in a partnership, a 

shareholder in an S corporation, or a 

beneficiary of a trust receives a timely 

Schedule K–1 less than 10 calendar 

days before the due date of the 

taxpayer’s return (including extensions) 

and, based on receipt of the timely 

Schedule K–1, the taxpayer determines 

that the taxpayer participated in a 

reportable transaction within the 

meaning of paragraph (c)(3) of this 

section, the disclosure statement will 

not be considered late if the taxpayer 

discloses the reportable transaction by 

filing a disclosure statement with OTSA 

within 60 calendar days after the due 

date of the taxpayer’s return (including 

extensions). The Commissioner in his 

discretion may issue in published 

guidance other provisions for disclosure 

under § 1.6011–4. 

(2) Special rules—(i) Listed 

transactions and transactions of 

interest. In general, if a transaction 

becomes a listed transaction or a 

transaction of interest after the filing of 

a taxpayer’s tax return (including an 

amended return) reflecting the 

taxpayer’s participation in the listed 

transaction or transaction of interest and 

before the end of the period of 

limitations for assessment of tax for any 

taxable year in which the taxpayer 

participated in the listed transaction or 

transaction of interest, then a disclosure 

statement must be filed, regardless of 

whether the taxpayer participated in the 

transaction in the year the transaction 

became a listed transaction or a 

transaction of interest, with OTSA 

within 90 calendar days after the date 

on which the transaction became a 

listed transaction or a transaction of 

interest. The Commissioner also may 

determine the time for disclosure of 

listed transactions and transactions of 

interest in the published guidance 

identifying the transaction. 

(ii) Loss transactions. If a transaction 

becomes a loss transaction because the 

losses equal or exceed the threshold 

amounts as described in paragraph 

(b)(5)(i) of this section, a disclosure 

statement must be filed as an 

attachment to the taxpayer’s tax return 

for the first taxable year in which the 

threshold amount is reached and to any 

subsequent tax return that reflects any 

amount of section 165 loss from the 

transaction. 

(3) Multiple disclosures. The taxpayer 

must disclose the transaction in the time 

and manner provided for under the 


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provisions of this section regardless of 

whether the taxpayer also plans to 

disclose the transaction under other 

published guidance, for example, 

§ 1.6662–3(c)(2). 

(4) Example. The following example 

illustrates the application of this 

paragraph (e): 

Example. In January of 2008, F, a calendar 

year taxpayer, enters into a transaction that 

at the time is not a listed transaction and is 

not a transaction described in any of the 

paragraphs (b)(3) through (7) of this section. 

All the tax benefits from the transaction are 

reported on F’s 2008 tax return filed timely 

in April 2009. On May 2, 2011, the IRS 

publishes a notice identifying the transaction 

as a listed transaction described in paragraph 

(b)(2) of this section. Upon issuance of the 

May 2, 2011 notice, the transaction becomes 

a reportable transaction described in 

paragraph (b) of this section. The period of 

limitations on assessment for F’s 2008 

taxable year is still open. F is required to file 

Form 8886 for the transaction with OTSA 

within 90 calendar days after May 2, 2011. 

(f) Rulings and protective 

disclosures—(1) Rulings. If a taxpayer 

requests a ruling on the merits of a 

specific transaction on or before the date 

that disclosure would otherwise be 

required under this section, and 

receives a favorable ruling as to the 

transaction, the disclosure rules under 

this section will be deemed to have been 

satisfied by that taxpayer with regard to 

that transaction, so long as the request 

fully discloses all relevant facts relating 

to the transaction which would 

otherwise be required to be disclosed 

under this section. If a taxpayer requests 

a ruling as to whether a specific 

transaction is a reportable transaction 

on or before the date that disclosure 

would otherwise be required under this 

section, the Commissioner in his 

discretion may determine that the 

submission satisfies the disclosure rules 

under this section for the taxpayer 

requesting the ruling for that transaction 

if the request fully discloses all relevant 

facts relating to the transaction which 

would otherwise be required to be 

disclosed under this section. The 

potential obligation of the taxpayer to 

disclose the transaction under this 

section will not be suspended during 

the period that the ruling request is 

pending. 

(2) Protective disclosures. If a taxpayer 

is uncertain whether a transaction must 

be disclosed under this section, the 

taxpayer may disclose the transaction in 

accordance with the requirements of 

this section and comply with all the 

provisions of this section, and indicate 

on the disclosure statement that the 

disclosure statement is being filed on a 

protective basis. The IRS will not treat 

disclosure statements filed on a 

protective basis any differently than 

other disclosure statements filed under 

this section. For a protective disclosure 

to be effective, the taxpayer must 

comply with these disclosure 

regulations by providing to the IRS all 

information requested by the IRS under 

this section. 

(g) Retention of documents. (1) In 

accordance with the instructions to 

Form 8886 (or a successor form), the 

taxpayer must retain a copy of all 

documents and other records related to 

a transaction subject to disclosure under 

this section that are material to an 

understanding of the tax treatment or 

tax structure of the transaction. The 

documents must be retained until the 

expiration of the statute of limitations 

applicable to the final taxable year for 

which disclosure of the transaction was 

required under this section. (This 

document retention requirement is in 

addition to any document retention 

requirements that section 6001 generally 

imposes on the taxpayer.) The 

documents may include the following: 

(i) Marketing materials related to the 

transaction; 

(ii) Written analyses used in decisionmaking related to the transaction; 

(iii) Correspondence and agreements 

between the taxpayer and any advisor, 

lender, or other party to the reportable 

transaction that relate to the transaction; 

(iv) Documents discussing, referring 

to, or demonstrating the purported or 

claimed tax benefits arising from the 

reportable transaction; and documents, 

if any, referring to the business purposes 

for the reportable transaction. 

(2) A taxpayer is not required to retain 

earlier drafts of a document if the 

taxpayer retains a copy of the final 

document (or, if there is no final 

document, the most recent draft of the 

document) and the final document (or 

most recent draft) contains all the 

information in the earlier drafts of the 

document that is material to an 

understanding of the purported tax 

treatment or tax structure of the 

transaction. 

(h) Effective/applicability date—(1) In 

general. This section applies to 

transactions entered into on or after 

August 3, 2007. However, this section 

applies to transactions of interest 

entered into on or after November 2, 

2006. Paragraph (f)(1) of this section 

applies to ruling requests received on or 

after November 1, 2006. Otherwise, the 

rules that apply with respect to 

transactions entered into before August 

3, 2007, are contained in § 1.6011–4 in 

effect prior to August 3, 2007 (see 26 

CFR part 1 revised as of April 1, 2007). 

(2) [Reserved]. 

§ 1.6011–4T [Removed] 

■ Par. 3. Section 1.6011–4T is removed. 

PART 20—ESTATE TAX; ESTATES OF 

DECEDENTS DYING AFTER AUGUST 

16, 1954 

■ Par. 4. The authority citation for part 

20 continues to read, in part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 5. Section 20.6011–4 is revised to 

read as follows: 

§ 20.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. If a transaction is 

identified as a listed transaction or a 

transaction of interest as defined in 

§ 1.6011–4 of this chapter by the 

Commissioner in published guidance 

(see § 601.601(d)(2)(ii)(b) of this 

chapter), and the listed transaction or 

transaction of interest involves an estate 

tax under chapter 11 of subtitle B of the 

Internal Revenue Code, the transaction 

must be disclosed in the manner stated 

in such published guidance. 

(b) Effective/applicability date. This 

section applies to listed transactions 

entered into on or after January 1, 2003. 

This section applies to transactions of 

interest entered into on or after 

November 2, 2006. 

PART 25—GIFT TAX; GIFTS MADE 

AFTER DECEMBER 31, 1954 

■ Par. 6. The authority citation for part 

25 continues to read, in part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 7. Section 25.6011–4 is revised to 

read as follows: 

§ 25.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. If a transaction is 

identified as a listed transaction or a 

transaction of interest as defined in 

§ 1.6011–4 of this chapter by the 

Commissioner in published guidance 

(see § 601.601(d)(2)(ii)(b) of this 

chapter), and the listed transaction or 

transaction of interest involves a gift tax 

under chapter 12 of subtitle B of the 

Internal Revenue Code, the transaction 

must be disclosed in the manner stated 

in such published guidance. 

(b) Effective/applicability date. This 

section applies to listed transactions 

entered into on or after January 1, 2003. 

This section applies to transactions of 

interest entered into on or after 

November 2, 2006. 


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PART 31—EMPLOYMENT TAXES AND 

COLLECTION OF INCOME TAX AT THE 

SOURCE 

■ Par. 8. The authority citation for part 

31 continues to read, in part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 9. Section 31.6011–4 is revised to 

read as follows: 

§ 31.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. If a transaction is 

identified as a listed transaction or a 

transaction of interest as defined in 

§ 1.6011–4 of this chapter by the 

Commissioner in published guidance 

(see § 601.601(d)(2)(ii)(b) of this 

chapter), and the listed transaction or 

transaction of interest involves an 

employment tax under chapters 21 

through 25 of subtitle C of the Internal 

Revenue Code, the transaction must be 

disclosed in the manner stated in such 

published guidance. 

(b) Effective/applicability date. This 

section applies to listed transactions 

entered into on or after January 1, 2003. 

This section applies to transactions of 

interest entered into on or after 

November 2, 2006. 

PART 53—FOUNDATION AND SIMILAR 

EXCISE TAXES 

■ Par. 10. The authority citation for part 

53 continues to read, in part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 11. Section 53.6011–4 is revised 

to read as follows: 

§ 53.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. If a transaction is 

identified as a listed transaction or a 

transaction of interest as defined in 

§ 1.6011–4 of this chapter by the 

Commissioner in published guidance 

(see § 601.601(d)(2)(ii)(b) of this 

chapter), and the listed transaction or 

transaction of interest involves an excise 

tax under chapter 42 of subtitle D of the 

Internal Revenue Code (relating to 

private foundations and certain other 

tax-exempt organizations), the 

transaction must be disclosed in the 

manner stated in such published 

guidance. 

(b) Effective/applicability date. This 

section applies to listed transactions 

entered into on or after January 1, 2003. 

This section applies to transactions of 

interest entered into on or after 

November 2, 2006. 

PART 54—PENSION EXCISE TAXES 

■ Par. 12. The authority citation for part 

54 continues to read, in part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 13. Section 54.6011–4 is revised 

to read as follows: 

§ 54.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. If a transaction is 

identified as a listed transaction or a 

transaction of interest as defined in 

§ 1.6011–4 of this chapter by the 

Commissioner in published guidance 

(see § 601.601(d)(2)(ii)(b) of this 

chapter), and the listed transaction or 

transaction of interest involves an excise 

tax under chapter 43 of subtitle D of the 

Internal Revenue Code (relating to 

qualified pension, etc., plans) the 

transaction must be disclosed in the 

manner stated in such published 

guidance. 

(b) Effective/applicability date. This 

section applies to listed transactions 

entered into on or after January 1, 2003. 

This section applies to transactions of 

interest entered into on or after 

November 2, 2006. 

PART 56—PUBLIC CHARITY EXCISE 

TAXES 

■ Par. 14. The authority citation for part 

56 continues to read, in part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 15. Section 56.6011–4 is revised 

to read as follows: 

§ 56.6011–4 Requirement of statement 

disclosing participation in certain 

transactions by taxpayers. 

(a) In general. If a transaction is 

identified as a listed transaction or a 

transaction of interest as defined in 

§ 1.6011–4 of this chapter by the 

Commissioner in published guidance 

(see § 601.601(d)(2) of this chapter), and 

the listed transaction or transaction of 

interest involves an excise tax under 

chapter 41 of subtitle D of the Internal 

Revenue Code (relating to public 

charities), the transaction must be 

disclosed in the manner stated in such 

published guidance. 

(b) Effective date. This section applies 

to listed transactions entered into on or 

after January 1, 2003. This section 

applies to transactions of interest 

entered into on or after November 2, 

2006. 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: July 25, 2007. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 07–3786 Filed 7–31–07; 11:22 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[TD 9352] 

RIN 1545–BE28 

AJCA Modifications to the Section 

6112 Regulations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations under section 6112 of the 

Internal Revenue Code that provide the 

rules relating to the obligation of 

material advisors to prepare and 

maintain lists with respect to reportable 

transactions. These regulations affect 

material advisors responsible for 

keeping lists under section 6112. 

DATES: Effective Date: These regulations 

are effective August 3, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Charles D. Wien, Michael H. Beker, or 

Tolsun N. Waddle, 202–622–3070; (not 

a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collections of information 

contained in this final regulation have 

been reviewed and approved by the 

Office of Management and Budget in 

accordance with the Paperwork 

Reduction Act (44 U.S.C. 3507) under 

control number 1545–1686. Responses 

to these collections of information are 

mandatory. An agency may not conduct 

or sponsor, and a person is not required 

to respond to, a collection of 

information unless the collection of 

information displays a valid OMB 

control number assigned by the Office of 

Management and Budget. 

The estimated annual burden per 

recordkeeper for the collection of 

information in § 301.6112–1 is 100 

hours and the estimated number of 

recordkeepers is 500. 

Comments concerning the accuracy of 

these burden estimates and suggestions 


rmajette on PROD1PC64 with RULES