What is a “Reportable Transaction”?

A “Reportable Transaction” is generally a transaction of a type that the IRS has determined as having a potential for tax avoidance or evasion.  There are five categories of reportable transactions; confidential transactions, transactions with contractual protection, loss transactions, transactions of interest and listed transactions.  See the brief descriptions of each type of transaction below. 

If you think you may have participated in any transactions that are the same as, or substantially similar to, one of these categories please contact your tax advisor to discuss the specific details of your transaction.  The IRS provides penalties of up to $250,000 per transaction for failure to report activity in any of these types of transactions.

Confidential Transactions:
Transactions that are offered under conditions of confidentiality, such as where the disclosure of a transaction is limited in any manner by express or implied understanding agreement whether or not such understanding or agreement is legally binding for transactions in excess of $250,000 for corporations and $50,000 for other transactions.

Transactions with Contractual Protection:
These are transactions when the taxpayer has the right to a full or partial refund of fees paid to any person who makes or provides an oral or written statement about the potential tax consequences of a transaction if it is not sustained, or if fees are contingent on the taxpayer’s realization of tax benefits from the transaction.

Loss Transactions:
The IRS has identified the following losses as potentially subject to abuse and requires anyone who claims a loss of at least one of the following amounts on a tax return to report the loss as a “Reportable Transaction”

Individuals, Partnerships & S Corporations:  At least $2million in a single tax year, or $4million in any combination of tax years, whether or not any losses flow through to one or more partners or shareholders.

C Corporations and Partnerships with only C Corporations as Partners:  At least $10million in any single tax year or $20million in any combination of tax years.

Foreign Currency:  A loss from a foreign currency transaction is a reportable loss transaction if the gross amount of the loss is at least $50,000 in a single tax year for individuals or trusts, whether or not the loss flows through from an S corporation or partnership.

Transactions of Interest:
These are transactions that the IRS has determined have the potential for tax avoidance or evasion, but they lack the specific information on each transaction to determine whether it should be reported.   These types of transactions include:

Charitable contribution deductions for taxpayers who hold an interest in an entity holding real estate.

Grantor-type trusts terminating and then being re-established.

Sale of an interest in a charitable remainder trust.

U.S. Taxpayer who owns a foreign partnership or trust through another U.S. entity.

Listed Transactions:
These are certain tax avoidance transactions that have been identified as abusive tax shelters and transactions, and have been “listed” by the IRS in notice, regulation or other forms of published guidance.  Taxpayers are required to disclose their participation in either listed or substantially similar transactions. There are currently 34 specific listed transactions. Read more about "What is a Listed Transaction"...>