W. Va. Code R. § 110-10J-5

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-10J-5 - Participation in a Reportable Transaction

5.1. A taxpayer is required by W. Va. Code § 11-10E-5 to file each year a disclosure statement with respect to each reportable transaction in which the taxpayer participated.

5.2. The following applies to determining whether a taxpayer participated in a reportable transaction.

5.2.1. Listed transactions. A taxpayer has participated in a listed transaction if the taxpayer's tax return reflects tax consequences or a tax strategy described in the published guidance that lists the transaction under Treasury Regulations Section 1.6011-4(b)(2). A taxpayer also has participated in a listed transaction if the taxpayer knows or has reason to know that the taxpayer's tax benefits are derived directly or indirectly from tax consequences or a tax strategy described in published guidance that lists a transaction described in Treasury Regulations Section 1.6011-4(b)(2). Published guidance may identify other types or classes of persons that will be treated as participants in a listed transaction.

5.2.2. Confidential transactions. A taxpayer has participated in a confidential transaction if the taxpayer's tax return reflects a tax benefit from the transaction and the taxpayer's disclosure of the tax treatment or tax structure of the transaction is limited in the manner described in Treasury Regulations Section 1.6011-4(b)(3). If a partnership's, S corporation's or trust's disclosure is limited, and the partner's, shareholder's, or beneficiary's disclosure is not limited, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the confidential transaction.

5.2.3. Transactions with contractual protection. A taxpayer has participated in a transaction with contractual protection if the taxpayer's tax return reflects a tax benefit from the transaction and, as described in Treasury Regulations Section 1.6011-4(b)(4), the taxpayer has the right to the full or partial refund of fees or the fees are contingent. If a partnership, S corporation, or trust has the right to a full or partial refund of fees or has a contingent fee arrangement, and the partner, shareholder, or beneficiary does not individually have the right to the refund of fees or a contingent fee arrangement, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the transaction with contractual protection.

5.2.4. Loss transactions. A taxpayer has participated in a loss transaction if the taxpayer's tax return reflects a I.R.C. § 165 loss and the amount of the I.R.C. § 165 loss equals or exceeds the threshold amount applicable to the taxpayer as described in Treasury Regulations Section 1.6011-4(b)(5)(i). If a taxpayer is a partner in a partnership, shareholder in an S corporation, or beneficiary of a trust and a I.R.C. § 165 loss as described in Treasury Regulations Section 1.6011-4(b)(5) flows through the entity to the taxpayer (disregarding netting at the entity level), the taxpayer has participated in a loss transaction if the taxpayer's tax return reflects a I.R.C. § 165 loss and the amount of the I.R.C. § 165 loss that flows through to the taxpayer equals or exceeds the threshold amounts applicable to the taxpayer as described in Treasury Regulations Section 1.6011-4(b)(5)(i). For this purpose, a tax return is considered to reflect the full amount of a I.R.C. § 165 loss described in Treasury Regulations Section 1.6011-4(b)(5) allocable to the taxpayer under this subdivision, regardless of whether all or part of the loss enters into the computation of a net operating loss under I.R.C. § 172 or net capital loss under I.R.C. § 1212 that the taxpayer may carry back or carry over to another year.

5.2.5. Transactions with a significant book-tax difference. A taxpayer has participated in a transaction with a significant book-tax difference if the taxpayer's tax treatment of an item from the transaction differs from the book treatment of that item as described in Treasury Regulations Section 1.6011-4(b)(6). In determining whether a transaction results in a significant book-tax difference for a taxpayer, differences that arise solely because a subsidiary of the taxpayer is consolidated with the taxpayer, in whole or in part, for book purposes, but not for tax purposes, are not taken into account.

5.2.6. Transactions involving a brief asset holding period. A taxpayer has participated in a transaction involving a brief asset holding period if the taxpayer's tax return reflects items giving rise to a tax credit described in Treasury Regulations Section 1.6011-4(b)(7). If a taxpayer is a partner in a partnership, shareholder in an S corporation, or beneficiary of a trust and the items giving rise to a tax credit described in Treasury Regulations Section 1.6011-4(b)(7) flow through the entity to the taxpayer (disregarding netting at the entity level), the taxpayer has participated in a transaction involving a brief asset holding period if the taxpayer's tax return reflects the tax credit and the amount of the tax credit claimed by the taxpayer exceeds $ 250,000.

5.2.7. Shareholders of foreign corporations. -- In general. A reporting shareholder of a foreign corporation participates in a transaction described in Treasury Regulations Section 1.6011-4(b)(2) through (5) and (b)(7) if the foreign corporation would be considered to participate in the transaction under the rules of Treasury Regulations Section 1.6011-4(c)(3) if it were a domestic corporation filing a tax return that reflects the items from the transaction. A reporting shareholder participates in a transaction described in Treasury Regulations Section 1.6011-4(b)(6) only if the foreign corporation would be considered to participate in the transaction under the rules of Treasury Regulations Section 1.6011-4(c)(3) if it were a domestic corporation and the transaction reduces or eliminates an income inclusion that otherwise would be required under I.R.C. § 551, 951, or 1293. A reporting shareholder (and any successor in interest) is considered to participate in a transaction under Treasury Regulations Section 1.6011-4(c)(3)(i)(G) only for its first taxable year with or within which ends the first taxable year of the foreign corporation in which the foreign corporation participates in the transaction, and for the reporting shareholder's five succeeding taxable years.

W. Va. Code R. § 110-10J-5