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IRS ENDS A DISCLOSURE REQUIREMENT FOR LARGE 'BOOK-TAX DIFFERENCES'
January 06, 2006
The IRS this afternoon stopped requiring the disclosure of transactions with "large book-tax" differences on the tax-shelter disclosure form, Form 8886. Notice 2006-06 says the new Form M-3, introduced last year in corporate returns, makes the Form 8886 disclosure unnecessary.
The requirement is ended for transactions "that otherwise would have tobe disclosed by taxpayers... on or after January 6, 2006, the date this notice is released to the public."
Prior to Notice 2006-06, transactions that generate big differences between financial accounting income and taxable income would generally have to be reported on Form 8886 if the difference was $10 million or more in a year, or $20 million or more over more than one year.
Interestingly, the disclosure requirement is ended even though the new Form M-3 for partnerships and S corporations will not be in place until 2006 returns are filed next year. That either means that the IRS felt the disclosure requirement was a waste of time in the first place, or that anticipation of the now-waived disclosure requirement was enough to make partnerships and S corporations behave in 2005.
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