The Office of Tax Shelter Analysis (OTSA) in the Large Business & International (LB&I) Division collects and analyzes information about abusive tax shelters and transactions, and coordinates LB&I's tax shelter planning and operation. We are taking steps to combat abusive tax shelters and transactions. A comprehensive strategy is in place
to: The IRS maintains an abusive tax
shelter hotline that people can use to provide information (anonymously, if preferred) about abusive tax shelter transactions. The Office of Tax Shelter Analysis is primarily interested in in potentially abusive transactions that may be employed by many taxpayers and could pose a significant compliance risk to the IRS. Don't use this hotline if you want to report an individual or company that you suspect or know isn't complying with the tax laws or has failed to pay the tax that they owe. Please refer to
Reporting Suspected Tax Fraud and
Whistleblower Informant Awards for more information on reporting these individuals or companies. Reportable TransactionsRegulations on Abusive Tax Shelters and TransactionsTreasury regulations require that certain tax shelters and transactions be registered and that lists of investors be maintained by parties who organize or sell interests in the shelter(s). Investors in certain shelters and transactions are required to disclose their participation on their tax returns. Types of Reportable Transactions:
Reportable Transaction Disclosure StatementIf you're a business or individual who has participated in one or more of the above transactions, you may be required to file a Form 8886. Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter TransactionIf you are a Tax-Exempt entity who has participated in a prohibited Tax Shelter Transaction defined below, you may be required to file a Form 8886-T.
Material AdvisorsA Material Advisor is defined as:
If you're a Material Advisor, you may be required to file the Form 8918, Material Advisor Disclosure Statement.
What's New:Notice 2015-73PDF - Listing Notice - Basket Option Contracts. This notice describes certain transactions involving a contract that is denominated as an option referencing a basket of actively traded personal property. The Basket Option Contract attempts to defer income recognition and convert short-term capital gain and ordinary income to long-term capital gain using a contract denominated as an option contract. This notice was published in the Internal Revenue Bulletin on November 16, 2015. Previously listed under Notice 2015-47 which was revoked. Notice 2015-74PDF – Transaction of Interest - Basket Contracts. This notice describes certain transactions denominated as an option, notional principal contract, forward contract, or other derivative contract to receive a return based on the performance of a basket of referenced assets (the “reference basket”). The assets that comprise the reference basket may include (1) interests in entities that trade securities, commodities, foreign currency, or similar property (“hedge fund interests”), (2) securities, (3) commodities, (4) foreign currency, or (5) similar property (or positions in such property). The Basket Contracts attempt to defer income recognition and may attempt to convert short-term capital gain and ordinary income to long-term capital gain. This notice was published in the Internal Revenue Bulletin on November 16, 2015. Previously released in Notice 2015-48 which was revoked. Notice 2016-66 – Section 831(b) Micro-Captive Transactions. Micro-captive arrangements described in the Notice became a reportable transaction on November 1, 2016. This Notice identifies as a transaction of interest the micro-captive transaction where a taxpayer enters into a purported insurance contract with a captive insurance company (“Captive”), or a purported reinsurance contract with a Captive through an intermediary insurance company, and where a Captive is at least 20 percent owned by the taxpayer or/and related parties. In addition, the micro-captive transaction has one or both of the following characteristics: 1) the amount of Captive’s liabilities for insured losses and claim administration expenses is less than 70 percent of the Captive’s earned premiums less paid policyholder dividends, or 2) Captive made available through a guarantee, a loan, or other transfer of Captive’s capital, any portion of payments received under contracts to the taxpayer or its owners. The taxpayer, an “insured” entity under the contract, claims ordinary deductions for purported insurance or reinsurance premiums while a Captive elects under § 831(b) of the Internal Revenue Code to be taxed only on investment income. Captive excludes the payments directly or indirectly received under the contracts from its taxable income. Notice 2017-8PDF – Section 831(b) Micro-Captive Transactions, amends the due date for filing of a disclosure with the Office of Tax Shelter Analysis for Notice 2016-66 transactions. Notice 2017-10PDF – Syndicated Conservation Easement Transactions - This notice describes certain transactions in which some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to obtain charitable contribution deductions in amounts that significantly exceed the amount invested. The promoters identify a pass-through entity that owns real property, or form a pass-through entity to acquire real property. Additional tiers of pass-through entities may be formed. The promoters then syndicate ownership interests in the pass-through entity or tiered entities that owns the real property, suggesting to prospective investors that they may be entitled to a share of a charitable contribution deduction that equals or exceeds two and one-half times the amount of the investor’s investment. The promoters obtain an inflated appraisal of the conservation easement based on unreasonable conclusions about the development potential of the real property. The entity then donates a conservation easement encumbering the property to a tax-exempt entity. Investors then claim a charitable contribution relying upon the pass-through entity’s holding period. Other Abusive TransactionsIn addition to the reportable transactions covered above, IRS is combating other types of abusive tax schemes, such as offshore tax avoidance schemes. Click here for information on steps IRS is taking to combat these other schemes:
Which of the following is true about option contracts?Which statements are TRUE about option contracts? The best answer is A. An "out the money" contract is one, that if exercised, would result in an unprofitable stock trade to the holder. These contracts are left to expire unexercised.
Which of the following influence the premium of a listed option?Factors of Option Premium
The main factors affecting an option's price are the underlying security's price, moneyness, useful life of the option, and implied volatility. As the price of the underlying security changes, the option premium changes.
Who pays the premium in an option contract?The premium of an option is paid by the buyer to the seller upon the sale of the contract—not at the contract's expiration. Option premiums are not refundable.
Which of the following statements is true regarding the purchaser of a call option?Which of the following statements is TRUE in relation to the buyer of a call option? A purchaser of a call option would have limited risk with the potential for unlimited profit.
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