Life after Ridgely: While Some Contingency Fee Restrictions Have Been Lifted, Practitioners Should Be Mindful that Reportable Transaction Rules Apply
8 Pages Posted: 25 Jan 2016
Date Written: September 6, 2015
The purpose of this article is to alert practitioners that despite the judicially enforced relaxation of the 10.27 restriction, another rule, the reportable transaction rule, has been applicable to any type of contingency fee arrangement and could become problematic if this failure to report is noticed by the IRS, presumably in an examination of the refund claim. While the reportable transaction rules regulate a number of aspects of tax shelter activities, this article will narrowly focus on one aspect of the reportable transaction rules. Namely, that under Reg. §1.6011-4(c)(4), nearly any contingent fee arrangement such as the type now legalized by the Ridgely decision will, nonetheless, be subject to the disclosure rules, and a Form 8886 must be submitted with the amended returns or the taxpayer (and possibly the preparer) could be subject to severe penalties.
Keywords: Contingency fees, amended returns, Ridgely v. Lew, Circular 230 Section 10.27, Reportable Transactions, Tax shelters
JEL Classification: E62
Suggested Citation: Suggested Citation