Abusive Tax Shelters - Definitions

Abusive Tax Avoidance Transaction (ATAT)

An abusive tax avoidance transaction means any plan or arrangement devised for the principal purpose of evading federal income tax, and includes but is not limited to, "listed transactions" as defined by the IRS.

Abusive Tax Shelter

An “abusive tax shelter” or “tax shelter” are additional names for an "abusive tax avoidance transaction" (ATAT).

Listed transaction

Listed transactions are a type of a reportable transaction. A "listed transaction" is a transaction that is the same as or substantially similar to one that the IRS has determined to be a tax avoidance transaction and identified by IRS notice or other form of published guidance. The IRS maintains a list of these transactions on its website.

Material Advisor

A material advisor is a person who provides material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and who directly or indirectly derives income from these services in an amount that exceeds certain IRS defined thresholds. The IRS requires every material advisor to a reportable transaction to file federal Form 8918, Material Advisor Disclosure Statement. A material advisor can be an individual, trust, estate, partnership, or corporation.

Reportable transaction

  • Listed transactions – transactions specifically identified by the IRS as tax avoidance transactions in an IRS notice or other form of published guidance.
  • Confidential transactions – transactions offered to a taxpayer under conditions of confidentiality and for which the taxpayer paid an advisor a minimum fee.
  • Transactions with contractual protection – transactions for which the fees depend on whether the intended tax benefits from the transaction are sustained.
  • Loss transactions under IRC Section 165 – loss transactions which exceed certain thresholds.
  • Transactions of interest – transactions which the IRS identifies as having the potential to become listed transactions, but it does not yet have enough information to make the determination.