Daily Tax Update - March 01, 2005

IRS, Treasury Issue Temporary and Proposed Regulations Regarding Qualified Amended Returns
Today, the IRS and Treasury issued temporary and proposed regulations under section 6664 (TD 9186; REG 122847-04) regarding the deadline for filing a qualified amended return ("QAR") for purposes of avoiding imposition of accuracy-related penalties under section 6662. The temporary and proposed regulations render Notice 2004-38 obsolete. The regulations provide that a return will qualify as a QAR only if it is filed before the earliest of the following dates:

  • The date the taxpayer is first contacted by the IRS concerning any examination with respect to the return to which the purported QAR relates;
  • The date any person is first contacted by the IRS concerning an examination of that person under section 6700 (relating to the penalty for promoting abusive tax shelters) of an activity with respect to which the taxpayer claimed any tax benefit on the return through the entity, plan, or arrangement described in section 6700(a)(1)(A);
  • In the case of a pass-through item, the date the pass-through entity is first contacted by the IRS in connection with an examination of the return to which the pass-through item relates;
  • The date on which the IRS serves a section 7609(f) (i.e., "John Doe") summons relating to the tax liability of a person, group, or class that includes the taxpayer with respect to an activity for which the taxpayer claimed any benefit from that type of activity, irrespective of the time period covered by the summons; and
  • The date on which a settlement initiative to compromise or waive penalties with respect to a listed transaction is published by the IRS. (The regulations note that the Commissioner may waive this deadline or identify a later deadline by which a taxpayer who participated in the listed transaction may file a QAR.)

Note that the first three dates described above are prescribed in current regulations.

  • The temporary regulations also provide special rules for "undisclosed listed transactions." An undisclosed listed transaction is a transaction that is the same as, or substantially similar to, a listed transaction that was not previously disclosed by the taxpayer in accordance with Treas. Reg. § 1.6011-4 or Announcement 2002-2. In the case of an undisclosed listed transaction, a return will constitute a QAR only if it is filed before the earliest of the following dates:
    • The dates described above for QARs in general;
    • The date on which the IRS first contacts any person regarding an examination of that person’s liability under section 6707(a) with respect to the undisclosed listed transaction of the taxpayer; or
    • The date on which the IRS requests, from any person who made a tax statement to or for the benefit of the taxpayer, who is a material advisor (under section 6111) with respect to the taxpayer, the information required to be included in a list under section 6112 relating to a transaction that is the same as, or substantially similar to, the undisclosed transaction, regardless of whether the taxpayer’s information is required to be included on that list.
  • The temporary regulations make clear that a QAR includes an amended return filed solely to disclose information under Treas. Reg. § 1.6011-4 (relating to reportable transactions), if the taxpayer also makes required disclosure to the Office of Tax Shelter Analysis.
  • The temporary regulations apply generally to amended returns and requests for administrative adjustment filed on or after March 2, 2005. However, the rules regarding summonses under section 7609(f), and the rules applicable to undisclosed listed transactions are effective for amended returns and requests for administrative adjustment filed on or after April 30, 2004
  •  The regulations can be accessed here
  • For additional information, contact: Philip R. West via email or Jean Male Baxley via email.

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