This GT Alert covers the following:

• Background on I.R.C. § 6707A - Penalty for Failing to Disclose Listed and Reportable Transactions

• Background on the Administrative Procedures Act and IRS rulemaking

• 6th Circuit’s holding in Mann Construction, Inc. v. U.S.

• Open questions after Mann Construction, Inc. v. U.S.

On March 3, 2022, the U.S. Court of Appeals for the Sixth Circuit ruled in Mann Construction, Inc. v. U.S.¹ the IRS must follow the Administrative Procedures Act (APA) when identifying “listed transactions” for purposes of applying the I.R.C. § 6707A penalty. Mann Construction may have far-reaching implications for taxpayers penalized for failing to disclose listed transactions. Moreover, the decision further clarifies the types of IRS guidance that must comply with the APA.

Background on I.R.C. § 6707A - Penalty for Failing to Disclose Listed and Reportable Transactions

I.R.C. § 6011 requires taxpayers to disclose their participation in reportable transactions by: (i) attaching a Form 8886, Reportable Transaction Disclosure Statement, to his or her tax return; and (ii) in the case of listed transactions, sending a copy of the Form 8886 to the Office of Tax Shelter Analysis (OTSA). A “reportable transaction” is defined as a transaction that has potential for tax avoidance or evasion. Listed transactions, which were at issue in Mann Construction, are one category of reportable transactions. I.R.C. § 6707A(c)(2) defines a “listed transaction” as one that is...

Read Full Story: https://www.natlawreview.com/article/6th-circuit-rules-irs-must-follow-admini...