Reportable Transactions PDF Download

The Internal Revenue Code requires “material advisors” to disclose “reportable transactions,” which include certain transactions generating large losses, and to retain and produce a list of individuals whom they advise with respect to these transactions. The disclosure and recordkeeping requirements were intended to enhance the ability of the Internal Revenue Service (“IRS) to review and audit abusive transactions. The loss transaction category of reportable transactions generates the vast majority of disclosures, but these transactions are rarely abusive. This article explains the disclosure and list maintenance rules for reportable transactions, as well as the penalties for failure to comply with these requirements, and the general definition of “reportable transaction” and the loss transaction category, specifically. The article then discusses the challenges of compliance with the reportable transaction rules and argues that the reportable loss transaction category should be significantly revised.