IRS Response to Accommodation Party Strategies Accommodation parties in S Corporation Transactions designated as participants. On April 26, 2004, we took an important step about the involvement of tax-exempt entities as accommodation parties in abusive tax transactions. In Notice 2004-30, we designated the S Corporation Transaction as a listed transaction and for the first time exercised our authority under the return disclosure regulations to designate specifically the tax-exempt accommodation party as a “participant” for purposes of those regulations. As a participant, the accommodation party must comply with the disclosure requirements. Thus, if required to file a return, the tax-exempt accommodation party must attach a Form 8886 to its return for the taxable year it received the donation from the S corporation, the taxable year of the reacquisition, and all intervening years. All filers will be required to identify accommodation parties involved. At the same time we issued Notice 2004-30, we also announced[2] that we would revise Form 8886 to require all filers to identify the names of all parties to a listed transaction, including the names of tax exempt parties that facilitate the transaction. We have just released the revised Form 8886. Thus, a tax-exempt accommodation party to a listed transaction that is not itself required to file Form 8886 will be identified through the Forms 8886 filed by the other parties to the transaction. Although this information could be obtained through the examination process, requiring this information on the Forms 8886 that are filed will give us a better picture early of the tax-exempt entities that are facilitating the abusive transactions. Previously listed transactions will be reviewed. We are reviewing transactions we have previously designated as “listed transactions” to determine whether we should treat tax-exempt accommodation parties in those transactions as “participants.” Future listed transactions. We will consider in all future listed transactions whether any tax-exempt accommodation parties should be designated as a participant. There may be other actions necessary, in a regulatory context or otherwise. We look forward to working with your staff in this important area. [2] Press release IR 2004-44. Continue with testimony text Return to testimony outline
