Additional Comments Concerning Temporary and Proposed Regulations
Under Sections 6011, 6111, and 6112 of the Internal Revenue Code of 1986
T.D. 8875, 8876, and 8877
February 21, 2001

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I. List of Transactions that are not Tax Shelters for Purposes of the Regulations

Section 1.6011-4T(b)(3)(ii)(D) of the tax return disclosure regulations provides that a transaction will not be a "reportable transaction" within the meaning of the disclosure regulations if the transaction is identified in published guidance as being excepted from disclosure under that section. Similarly, section 301.6111-2T(b)(5)(ii) of the tax shelter registration regulations provides that tax avoidance or evasion will not be considered a significant purpose of a transaction and, therefore, the transaction will not be required to be registered, if the IRS determines, by published guidance, individual ruling, or otherwise, that the transaction is not subject to the registration requirements. Such a determination also will apply for purposes of the investor list maintenance regulations. In Notice 2001-18, the IRS exercised its authority under the regulations and determined that certain leveraged leasing transactions that meet the requirements of Revenue Procedure 75-21 are not "tax shelters" for purposes of the registration requirements. We recommend that the IRS clarify that Notice 2001-18 also applies for purposes of section 1.6011-4T(b)(3)(ii)(D) of the tax return disclosure regulations. In addition, we recommend that the IRS or the Treasury Department issue guidance providing that the following transactions are not "reportable transactions" for purposes of the disclosure regulations or "tax shelters" under the registration regulations:

• Transactions that generate tax benefits listed in section 1.6662-4(g)(2)(ii) of the Treasury regulations (i.e., the purchasing or holding of an obligation bearing interest that is excluded from gross income under Code section 103; taking an accelerated depreciation allowance under Code section 168; taking the percentage depletion allowance under Code section 613 or 613A; deducting intangible drilling and development costs as expenses under Code section 263(c); establishing a qualified retirement plan under Code sections 401-409; claiming the possession tax credit under Code section 936; or claiming tax benefits available by reason of an election under Code section 992 to be taxed as a domestic international sales corporation, under Code section 927(f)(1) to be taxed as a foreign sales corporation, or under Code section 1362 to be taxed as an S corporation).
   
• Transactions generating tax credits under Code section 29 or 42.
   
• The failure of a partnership to make a Code section 754 election.
   
• Other transactions expressly permitted by the partnership anti-abuse regulations in Treasury regulations section 1.701-2.
   
• Choice of entity or checking the box.
   
• Transactions permitted by the Supreme Court’s decision in Cottage Savings.
   
• Partnership redemptions that use property rather than cash.
   
• Like-kind exchanges that are part of a sale of an asset.
   
• Substituting debt for equity or choosing to issue debt instead of equity.
   
• Transferring insurance operations to a subsidiary. 

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