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| by Lance Wallach |
In recent years, the Internal Revenue Service has identified many of these arrangements as abusive devices to funnel tax-deductible dollars to shareholders, and classified these arrangements as "listed transactions."
These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life-insurance commissions. In general, taxpayers who engage in a "listed transaction" must report such transactions to the IRS on Form 8886 every year that they participate in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Tax Code imposes severe penalties ($200,000 for a business and $100,000 for an individual) for failure to file Form 8886 with respect to a listed transaction.
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