Final regs. issued on reportable transaction penalties.

The IRS issued final regulations (T.D. 9550), governing the Sec. 6707A penalty regime for failure to report reportable transactions, to reflect changes made by the Small Business Jobs Act of 2010, RL. 111-240. However, the final regulations do not give guidance on how the amount of the penalty is computed. The IRS said it is aware of questions that have been raised in that regard and expects to issue further guidance later, for which it invited public comments.

As amended by the Small Business Jobs Act, Sec. 6707A imposes a penalty for failing to report on any return or statement any reportable transaction (a transaction the IRS determines has a potential for tax avoidance or evasion, including listed transactions). The penalty is 75% of any decrease in tax shown on the return (or that would have resulted if the transaction had been respected for federal tax purposes), with different minimum and maximum penalty amounts set for reportable and listed transactions.

Before amendment by the Small Business Jobs Act, Sec. 6707A had prescribed specific fixed-dollar penalty amounts for reportable and listed transactions without reference to any percentage of tax benefit, so the penalty could exceed the tax benefit from the...