West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-10J - Abusive Tax Shelters › Section 110-10J-5 - Participation in a Reportable Transaction

Current through Register Vol. XLI, No. 28, July 12, 2024
5.1. A taxpayer is required by W. Va. Code
				§
									11-10E-5
				to file each year a disclosure statement with respect to each reportable
				transaction in which the taxpayer participated.
5.2. The following applies to determining
				whether a taxpayer participated in a reportable transaction.
5.2.1. 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 Treasury Regulations Section 1.6011-4(b)(2). 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 described in Treasury Regulations Section
				1.6011-4(b)(2). Published guidance may identify other types or classes of
				persons that will be treated as participants in a listed transaction.
5.2.2. 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 Treasury Regulations Section 1.6011-4(b)(3). 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.
5.2.3. 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 Treasury Regulations Section 1.6011-4(b)(4),
				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.
5.2.4. Loss transactions. A taxpayer has
				participated in a loss transaction if the taxpayer's tax return reflects a
				I.R.C. § 165 loss and the amount of the I.R.C. § 165 loss equals or
				exceeds the threshold amount applicable to the taxpayer as described in
				Treasury Regulations Section 1.6011-4(b)(5)(i). If a taxpayer is a partner in a
				partnership, shareholder in an S corporation, or beneficiary of a trust and a
				I.R.C. § 165 loss as described in Treasury Regulations Section
				1.6011-4(b)(5) 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 I.R.C. § 165 loss and the amount of
				the I.R.C. § 165 loss that flows through to the taxpayer equals or exceeds
				the threshold amounts applicable to the taxpayer as described in Treasury
				Regulations Section 1.6011-4(b)(5)(i). For this purpose, a tax return is
				considered to reflect the full amount of a I.R.C. § 165 loss described in
				Treasury Regulations Section 1.6011-4(b)(5) allocable to the taxpayer under
				this subdivision, regardless of whether all or part of the loss enters into the
				computation of a net operating loss under I.R.C. § 172 or net capital loss
				under I.R.C. § 1212 that the taxpayer may carry back or carry over to
				another year.
5.2.5. Transactions
				with a significant book-tax difference. A taxpayer has participated in a
				transaction with a significant book-tax difference if the taxpayer's tax
				treatment of an item from the transaction differs from the book treatment of
				that item as described in Treasury Regulations Section 1.6011-4(b)(6). In
				determining whether a transaction results in a significant book-tax difference
				for a taxpayer, differences that arise solely because a subsidiary of the
				taxpayer is consolidated with the taxpayer, in whole or in part, for book
				purposes, but not for tax purposes, are not taken into account.
5.2.6. Transactions involving a brief asset
				holding period. A taxpayer has participated in a transaction involving a brief
				asset holding period if the taxpayer's tax return reflects items giving rise to
				a tax credit described in Treasury Regulations Section 1.6011-4(b)(7). If a
				taxpayer is a partner in a partnership, shareholder in an S corporation, or
				beneficiary of a trust and the items giving rise to a tax credit described in
				Treasury Regulations Section 1.6011-4(b)(7) flow through the entity to the
				taxpayer (disregarding netting at the entity level), the taxpayer has
				participated in a transaction involving a brief asset holding period if the
				taxpayer's tax return reflects the tax credit and the amount of the tax credit
				claimed by the taxpayer exceeds $ 250,000.
5.2.7. Shareholders of foreign corporations.
				-- In general. A reporting shareholder of a foreign corporation participates in
				a transaction described in Treasury Regulations Section 1.6011-4(b)(2) through
				(5) and (b)(7) if the foreign corporation would be considered to participate in
				the transaction under the rules of Treasury Regulations Section 1.6011-4(c)(3)
				if it were a domestic corporation filing a tax return that reflects the items
				from the transaction. A reporting shareholder participates in a transaction
				described in Treasury Regulations Section 1.6011-4(b)(6) only if the foreign
				corporation would be considered to participate in the transaction under the
				rules of Treasury Regulations Section 1.6011-4(c)(3) if it were a domestic
				corporation and the transaction reduces or eliminates an income inclusion that
				otherwise would be required under I.R.C. § 551, 951, or 1293. A reporting
				shareholder (and any successor in interest) is considered to participate in a
				transaction under Treasury Regulations Section 1.6011-4(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.