SECTION 2. BACKGROUND

.01 Under § 1.446–6, if a taxpayer receives an inducement fee in connection with becoming the holder of a noneconomic residual interest in a REMIC, the inducement fee must be taken into account over the remaining expected life of the applicable REMIC in a manner that reasonably reflects, without regard to § 1.446–6(c), the after-tax costs and benefits of holding that noneconomic residual interest. See § 1.446–6(c) and (d). Section 1.446–6 provides two safe harbor methods of accounting for these inducement fees, the book method in § 1.446–6(e)(1) and the modified REMIC regulatory method in § 1.446–6(e)(2). Section 1.446–6(e)(3) authorizes the Commissioner to provide one or more additional safe harbor methods by publishing a revenue ruling or revenue procedure.

.02 If a method of accounting for inducement fees received with respect to becoming the holder of noneconomic REMIC residual interests does not comply with § 1.446–6, that method of accounting is impermissible. Any change in a taxpayer’s treatment of these inducement fees, including a change to conform to § 1.446–6, is a change in method of accounting to which the provisions of §§ 446

June 14, 2002. (T.D. 9000, 2002–2 C.B. 87, 6/14/2002). The June 2002 modifications also removed the dollar thresholds related to tax savings for all taxpayers engaging in listed transactions. The regulations under section 6011 requiring disclosure of reportable transactions were modified substantially in October 2002 (T.D. 9017, 2002–2 C.B. 815, 10/17/2002) and finalized in February 2003 (T.D. 9046, 2003–1 C.B. 614, 2/27/2003). The February 2003 final regulations also amended the regulations under sections 6111 and 6112 relating to the registration of and list maintenance for certain transactions.

In early 2002, the Treasury Department and the Service gave taxpayers the opportunity to avoid the imposition of certain penalties by disclosing their participation in any transaction for which the imposition of the accuracy-related penalty under section 6662 may be appropriate. In Announcement 2002–2, 2002–1 C.B. 304, the Service agreed to waive certain components of the accuracy-related penalty under section 6662 for taxpayers who disclosed any item in accordance with the terms of Announcement 2002–2 by April 23, 2002.

DISCUSSION

I. Revised Definition of Qualified Amended Returns

The Treasury Department and the Service have identified additional periods of time after which a taxpayer is no longer permitted to file a qualified amended return. In addition to the current requirements, the temporary regulations will require that a taxpayer file a qualified amended return before the earliest of:

(1) The date on which a third party is served a John Doe summons described in section 7609(f) relating to the tax liability of a person, group, or class that includes the taxpayer, with respect to the return reflecting the transactions or tax items that are the subject of the summons, or

(2) The “date of contact” or “date of request,” described below, in the case of a transaction with respect to which the taxpayer claimed any direct or indirect tax benefits on its return and that is the same or substantially similar to a transaction that has been designated as a “listed transaction” (regardless of whether the taxpayer’s transaction is required to be

disclosed as a listed transaction under Treasury Regulation § 1.6011–4), unless the taxpayer disclosed the transaction under Treasury Regulation § 1.6011–4 or pursuant to Announcement 2002–2 before the date of contact or date of request.

(a) Date of contact . The date of contact is the date on which any person required to register a tax shelter under section 6111(a) is first contacted by the Service concerning an examination of an activity described in section 6707(a) (relating to the failure to register a tax shelter as defined in section 6111 or the filing of false or incomplete information with respect to that registration) relating to a type of listed transaction with respect to which the taxpayer claimed any direct or indirect tax benefits on its return. The rules in the temporary regulations will apply even if the taxpayer’s transaction is not required to be disclosed as a listed transaction under Treasury Regulation § 1.6011–4.

(b) Date of request . The date of request is the date on which any person described in section 6112(a) (organizer or seller, including a material advisor as defined in the Treasury Regulations under section 6112) receives a request from the Service for information required to be included on a list under section 6112 relating to a type of listed transaction with respect to which the taxpayer claimed any direct or indirect tax benefits on its return. The rules in the temporary regulations will apply even if the taxpayer’s information is not required to be included on the list requested by the Service.

The regulations also will provide similar rules in the case of pass-through items. In addition, where appropriate, the regulations will reference the October 2002 temporary regulations under sections 6011 and 6112 and other temporary regulations under sections 6011, 6111, and 6112.

II. Effective Date of Regulations Issued Pursuant to This Notice

The regulations to be issued will be effective for amended returns and requests for administrative adjustment filed on or after April 30, 2004, the date this notice is issued.

DRAFTING INFORMATION

The principal author of this notice is Nancy M. Galib of the Office of Associate

May 24, 2004 950 2004-21 I.R.B.

cordance with section 6 of Rev. Proc. 2002–9, and the taxpayer enters the designated number for the automatic change in method in Line 1a of the Form 3115. The designated number for the automatic accounting method change authorized by this revenue procedure is “79”.

(3) The taxpayer identifies the specific safe harbor method under § 1.446–6(e) to which the taxpayer is changing.