IRS Chief Counsel - Interest suspension on reportable loss transactions 

September 16: The IRS posted a field advice memorandum* prepared by field attorneys in the IRS Chief Counsel Office, addressing an individual taxpayer’s claim for interest suspension pursuant to section 6404(g) with respect to her disclosed participation in a reportable loss transaction. 20133702F (posted September 13, 2013, and dated August 15, 2013).

The redacted IRS memo [PDF 174 KB] explains that the underlying transaction was a “loss” transaction and as such “a reportable transaction.” The taxpayer reported a section 165 loss in excess of $2 million, with respect to a transaction similar to the “distressed asset/debt” transaction on her income tax returns for two tax years on a Form 8886 attached to each of her returns for the tax years at issue. The transaction, however, was not a listed transaction.


The IRS memo concludes that the taxpayer generally would be entitled to interest suspension because she properly disclosed her participation in a reportable loss transaction that was not a listed transaction.


However, she was not entitled to section 6404(g) interest suspension for certain tax years because the gross misstatement exception applied to both of those years. The interest-suspension exception for gross misstatements is not effective for tax years beginning after December 31, 2003, and thus is only applicable with respect to a prior tax year.


*Chief Counsel Advice documents are legal advice, signed by executives in the National Office of the IRS Office of Chief Counsel and issued to IRS personnel who are national program executives and managers. The documents are issued to assist IRS personnel in administering their programs by providing authoritative legal opinions on certain matters, such as industry-wide issues. However, they are not to be used or cited as precedent.




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