SECTION 2. Background

On December 30, 2003, the Internal Revenue Service (Service) issued temporary regulations under sections 6043(c) and 6045 of the Internal Revenue Code (T.D. 9101, 2004–5 I.R.B. [68 FR 75119]). These regulations, which revise temporary regulations issued on November 18, 2002 (T.D. 9022, 2002–2 C.B. 909 [67 FR 69468]), require information reporting if a domestic corporation undergoes an acquisition of control or a substantial change in capital structure after December 31, 2002, if the reporting corporation or any shareholder is required to recognize gain (if any) as a result of the application of section 367(a) of the Internal Revenue Code (Code). Pursuant to the revised regulations, a corporation must file Form 8806, “ Information Return for Acquisition of Control or Substantial Change in Capital Structure,” reporting and describing the acquisition of control or substantial change in capital structure. In addition, the revised regulations require the corporation to file Form 1099–CAP, “ Changes in Corporate Control and Cap- ital Structure,” with the Service with respect to each of its shareholders that

bor’s plan asset regulation (29 C.F.R. § 2510.3–101), the provision of services by the Roth IRA Corporation to the Taxpayer’s Business (which is a disqualified person with respect to the Roth IRA under § 4975(e)(2)) would constitute a prohibited transaction under § 4975(c)(1)(C). ² Further, the Department of Labor has advised the Service that, if a transaction between a disqualified person and the Roth IRA would be a prohibited transaction, then a transaction between that disqualified person and the Roth IRA Corporation would be a prohibited transaction if the Roth IRA may, by itself, require the Roth IRA Corporation to enter into the transaction. ³

Listed Transactions

The following transactions are identified as “listed transactions” for purposes of §§ 1.6011–4(b)(2), 301.6111–2(b)(2) and 301.6112–1(b)(2) effective December 31, 2003, the date this document is released to the public: arrangements in which an individual, related persons described in § 267(b) or 707(b), or a business controlled by such individual or related persons, engage in one or more transactions with a corporation, including contributions of property to such corporation, substantially all the shares of which are owned by one or more Roth IRAs maintained for the benefit of the individual, related persons described in § 267(b)(1), or both. The transactions are listed transactions with respect to the individuals for whom the Roth IRAs are maintained, the business (if not a sole proprietorship) that is a party to the transaction, and the corporation substantially all the shares of which are owned by the Roth IRAs. Independent of their classification as “listed transactions,” these transactions may already be subject to the disclosure requirements of § 6011 (§ 1.6011–4), the tax shelter registration requirements of § 6111 (§§ 301.6111–1T and 301.6111–2), or the list maintenance requirements of § 6112 (§ 301.6112–1).

Substantially similar transactions include transactions that attempt to use a single structure with the intent of achiev

ing the same or substantially same tax effect for multiple taxpayers. For example, if the Roth IRA Corporation is owned by multiple taxpayers’ Roth IRAs, a substantially similar transaction occurs whenever that Roth IRA Corporation enters into a transaction with a business of any of the taxpayers if distributions from the Roth IRA Corporation are made to that taxpayer’s Roth IRA based on the purported business transactions done with that taxpayer’s business or otherwise based on the value shifted from that taxpayer’s business to the Roth IRA Corporation.

Persons required to register these tax shelters under § 6111 who have failed to do so may be subject to the penalty under § 6707(a). Persons required to maintain lists of investors under § 6112 who have fail to do so (or who fail to provide such lists when requested by the Service) may be subject to the penalty under § 6708(a). In addition, the Service may impose penalties on participants in this transaction or substantially similar transactions, including the accuracy-related penalty under § 6662, and as applicable, persons who participate in the reporting of this transaction or substantially similar transactions, including the return preparer penalty under § 6694, the promoter penalty under § 6700, and the aiding and abetting penalty under § 6701.

The Service and the Treasury recognize that some taxpayers may have filed tax returns taking the position that they were entitled to the purported tax benefits of the type of transaction described in this notice. These taxpayers should consult with a tax advisor to ensure that their transactions are disclosed properly and to take appropriate corrective action.

Drafting Information

The principal author of this notice is Michael Rubin of the Employee Plans, Tax Exempt and Government Entities Division. However, other personnel from the Service and Treasury participated in its development. Mr. Rubin may be reached at (202) 283–9888 (not a toll-free call).

2 For the Roth IRA Corporation to be considered as holding plan assets under the Department of Labor’s plan asset regulation, the Roth IRA’s investment in the Roth IRA Corporation must be an equity interest, the Roth IRA Corporation’s securities must not be publicly-offered securities, and the Roth IRA’s investment in the Roth IRA Corporation must be significant. 29 C.F.R. §§ 2510.3–101(a)(2), 2510.3–101(b)(1), 2510.3–101(b)(2), and 2510.3–101(f). Although the Roth IRA Corporation would not be treated as holding plan assets if the Roth IRA Corporation constituted an operating company within the meaning of 29 C.F.R. § 2510.3–101(c), given the context of the examples described in this notice, it is unlikely that the Roth IRA Corporation would qualify as an operating company.

3 See 29 C.F.R. § 2509.75–2(c).

January 26, 2004 334 2004-4 I.R.B.

and other property) provided to the customer in Box 2 (Stocks, bonds, etc.). Brokers should use Box 5 (Description) to report the name and address of the corporation which engaged in the transaction and the number and class of shares exchanged by the customers (as required by § 1.6045–3T(d)(2) and (3)).