Tax Shelter Transactions: Penalties and Disclosure Requirements

Summary

This practice note discusses the types of transactions that a taxpayer is required to disclose to the Internal Revenue Service (IRS) based on their perceived abusive nature. It also explores the required form to make such disclosure and the penalties which can be imposed for failure properly disclose such transactions. These rules arose from a series of high profile tax shelter cases in the 1990s. Congress and the Treasury Department reacted to these cases by enacting significant new rules in this area in an attempt to end such transactions, but as is often the case, the response can in certain circumstances ensnare otherwise routine transactions.