Modified penalty for failing to maintain investor lists.

• Author: Manning, Paul

An organizer or seller of a potentially abusive tax shelter must maintain a list identifying each person who was sold an interest in a shelter for which registration was required under Sec. 6111. Recently issued regulations under Sec. 6112, which outline the list maintenance requirements, generally applied, pre-ACJA, to transactions entered into, or acquired after, Feb. 28, 2003. Under the regulations, a person is an organizer or seller of a potentially abusive tax shelter if he or she is a material advisor with respect to the transaction. A material advisor is a person who is required to register the transaction or expects to receive a fee of at least (1) $250,000 for potentially abusive tax shelter transactions, in which all of the participants are corporations; or (2) $50,000 for all other potentially abusive tax shelter transactions. For listed transactions, the minimum fees are reduced to $25,000 for transaction involving corporations and $10,000 for all other listed transaction arrangements.

A potentially abusive tax shelter is any transaction that (1) must be registered under Sec. 6111; (2) is a listed transaction; or (3) a potential material advisor knows is (or expects will become) a reportable transaction.

Penalty for failing to maintain investor lists: Prior to the ACJA, Sec. 6708 imposed a $50 penalty for each name omitted from an investor list. The maximum penalty was $100,000 per year.

New Law

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