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.

©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year