[Code of Federal Regulations]
[Title 26, Volume 18]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6707-1T]

[Page 426-428]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
   Additions to the Tax, Additional Amounts, and Assessable Penalties
 
Sec. 301.6707-1T  Questions and answers relating to penalties for failure 
to furnish information regarding tax shelters.

    The following questions and answers relate to the penalties imposed 
by section 6707 of the Internal Revenue Code of 1954, as added by 
section 141(b) of the Tax Reform Act of 1984 (Pub. L. 98-369, 98 Stat. 
681), for failure to furnish information regarding tax shelters.

Penalties for Failure To Register and for Providing False or Incomplete 
                               Information

    Q-1. What are the consequences if a person required to register a 
tax shelter (``tax shelter organizer'') fails to register the shelter 
timely?
    A-1. Generally, a penalty will be imposed. The penalty for failure 
to register timely is the greater of (i) $500 or (ii) 1 percent of the 
aggregate amount invested in the tax shelter, not to exceed $10,000. The 
$10,000 limitation does not apply, however, if the tax shelter organizer 
intentionally disregards the registration requirements. For purposes of 
this penalty, the aggregate amount invested in the tax shelter is 
computed in the manner prescribed in A-21 of Sec. 301.6111-1T, except 
that the amount to be received from the sale of an interest is taken 
into account to determine the amount of the penalty only if the interest 
is sold to an investor. No penalty will be imposed on a person for 
failure to register a tax shelter if the failure is due to reasonable 
cause. See A-4 through A-6 of this section for rules relating to 
reasonable cause.
    Q-2. Will registration of a tax shelter by a person participating in 
the management (``manager'') or a person participating in the sale 
(``seller'') of a tax shelter after the date that interests in the tax 
shelter were first offered for sale relieve a person principally 
responsible for organizing the tax shelter (``principal organizer'') or 
a person who participated in the organization of the tax shelter of 
liability for failure to register?
    A-2. No. A principal organizer of a tax shelter and a person who 
participates in the organization of a tax shelter are subject to penalty 
if they fail to register a tax shelter by the day interests in the tax 
shelter are first offered for sale, regardless of whether a seller or 
manager subsequently registers the tax shelter.
    Q-3. Does registration of a tax shelter by a seller or manager 
relieve other sellers or managers who are required to register the tax 
shelter from liability for failure to register?
    A-3. No. Sellers and managers who are required to register a tax 
shelter and fail to do so are subject to the penalty unless their 
failure to register is due to reasonable cause. A seller or manager, 
however, is not required to register a tax shelter once the seller or 
manager knows the tax shelter has been registered. See A-6 of this 
section for rules relating to reasonable cause for failure to register 
in the case of a seller.
    Q-4. What constitutes reasonable cause for failure to register a tax 
shelter?
    A-4. In general, the determination of whether reasonable cause 
exists for failure to register a tax shelter is a

[[Page 427]]

question of fact. In determining whether reasonable cause exists, all 
representations known to the tax shelter organizer (or for which there 
is reason for the tax shelter organizer to have known) must be taken 
into account. A tax shelter organizer (other than a seller) ordinarily 
will be deemed to know of all representations (including those made by 
sellers) that the tax shelter organizer would have discovered through 
inquiry that a reasonable person acting in the tax shelter organizer's 
capacity could have undertaken. Thus, for example, a principal organizer 
generally will be obligated to make a more thorough inquiry than a 
person who merely participated in the management of a tax shelter.
    Q-5. Will a tax shelter organizer who is required to register a tax 
shelter before October 1, 1984, have reasonable cause for failure timely 
to register the tax shelter, if the tax shelter organizer registers the 
tax shelter after the day on which the first offering for sale of 
interests occurs, but before October 1, 1984?
    A-5. Yes. A person who is required to register a tax shelter before 
October 1, 1984 (i.e., a tax shelter in which the first offering for 
sale of an interest occurred before September 1, 1984, but in which 
interests will be sold after August 31, 1984, or a tax shelter in which 
the first offering for sale of an interest occurs after August 31, 1984, 
and before October 1, 1984), will have reasonable cause for the failure 
to register timely if the person registers the tax shelter on or before 
September 30, 1984.
    Q-6. What constitutes reasonable cause for failure to register a tax 
shelter in the case of a seller of interests in the tax shelter?
    A-6. Reasonable cause for failure to register a tax shelter will 
generally exist with respect to a seller who is required to register the 
tax shelter under A-36 or A-39 of Sec. 301.6111-1T, if the seller 
registers the tax shelter as soon as practicable after the seller first 
knows or has reason to know that the tax shelter has not been timely 
registered. A seller will not have reasonable cause, however, if the 
seller fails to make a reasonable inquiry to determine whether the tax 
shelter is registered.
    Q-7. If a group of tax shelter organizers enters into a designation 
agreement under A-38 of Sec. 301.6111-1T and the designated organizer 
fails to register the tax shelter timely, will the other persons who 
have signed the designation agreement have reasonable cause for failure 
to register the tax shelter?
    A-7. Each of the persons who signs a designation agreement, other 
than the designated organizer, will have reasonable cause for failure to 
register the tax shelter timely, provided the person does not 
participate in the tax shelter at a time when the person knows or has 
reason to know the tax shelter is not registered (without registering 
the tax shelter) and the person registers the tax shelter as required by 
A-39 of Sec. 301.6111-1T.
    Q-8. What are the consequences if a tax shelter organizer files 
false or incomplete information on Form 8264?
    A-8. Generally, a penalty will be imposed for filing information 
that a reasonable person would know or have reason to know is false or 
incomplete. The amount of the penalty is the greater of (i) $500 or (ii) 
1 percent of the aggregate amount invested in the tax shelter (computed 
in the manner prescribed in A-1 of this section), but not to exceed 
$10,000. The $10,000 limitation does not apply, however, if the tax 
shelter organizer intentionally disregards the requirements relating to 
registration.
    Q-9. What is the maximum penalty that may be imposed on any one tax 
shelter?
    A-9. Although the penalty for failure to register a tax shelter 
timely and the penalty for providing false or incomplete information may 
be imposed on each person who fails to register a tax shelter timely or 
who provides false or incomplete information, the maximum penalty is 
$10,000 for any one tax shelter, provided there is no intentional 
disregard of the registration requirements. For example, assume that A 
is the principal organizer of a tax shelter, and seven other persons 
participate in the organization of the tax shelter, and assume the tax 
shelter is not registered before the day on which the first offering for 
sale of an interest in the tax shelter occurs. Assume also that the A

[[Page 428]]

and other participants do not have reasonable cause for failure to 
register timely and the failure is not due to intentional disregard of 
the registration requirement on the part of any of the participants. The 
maximum penalty that may be imposed is $10,000, for which the 8 
participants are jointly and severally liable.
    Q-10. How will the Internal Revenue Service determine whether a 
person has intentionally disregarded any of the registration 
requirements?
    A-10. The determination of intentional disregard will be made 
individually for each tax shelter organizer. If one tax shelter 
organizer intentionally disregards the registration requirements, the 
$10,000 limitation will not apply to that organizer. The limitation will 
apply, however, to any tax shelter organizers whose failure to register 
timely or whose furnishing of false or incomplete information was not 
due to intentional disregard.
    Q-11. What is the maximum penalty that may be imposed if a tax 
shelter that is a substantial investment consisting of similar 
investments that are required to be aggregated under A-22 of Sec. 
301.6171-1T is not timely registered or if false or incomplete 
information is filed with respect to the tax shelter?
    A-11. The maximum penalty is $10,000 as determined under A-6 of this 
section, with respect to any investment that is a tax shelter within the 
meaning of A-4 of Sec. 301.6111-1T without regard to the aggregation 
rules provided in A-22 of Sec. 301.6111-1T. The maximum penalty that 
may be imposed with respect to investments that are considered in a 
single tax shelter only by reason of the aggregation rules of A-22 of 
Sec. 301.6111-1T is $10,000, even if more than one Form 8264 is 
required with respect to the aggregated investment (see A-48 of Sec. 
301.6111-1T). The penalty may be imposed, however, if there is a failure 
with respect to any of the required forms.

          Penalty for Failure To Furnish a Registration Number

    Q-12. What is the penalty for failure to furnish the registration 
number to a purchaser or other transferee of an interest in a tax 
shelter as required by A-52 through A-54 of Sec. 301.6111-1T?
    A-12. The penalty for failure to furnish the tax shelter 
registration number in the form required by A-55 through A-54 of Sec. 
301.6111-1T is $100 for each failure.

     Penalty for Failure To Report a Registration Number on a Return

    Q-13. What is the penalty for failure to include the tax shelter 
registration number on a return on which any deduction, loss, credit, 
other tax benefit, or any income attributable to a registered tax 
shelter is included?
    A-13. The penalty for each failure by an investor to furnish the tax 
shelter registration number on such a return is $50 for each tax 
shelter, unless the failure is due to reasonable cause.
    There is a need for immediate guidance with respect to provisions 
contained in this Treasury decision. For this reason, it is found 
impracticable to issue it with notice and public procedure under 
subsection (b) of section 553 of title 5 of United States Code or 
subject to the effective date limitation of subsection (d) of that 
section.

(Secs. 6111 and 7805, Internal Revenue Code of 1954 (98 Stat. 678, 26 
U.S.C. 6111; 68A Stat. 917, 26 U.S.C. 7805))

[T.D. 7964, 49 FR 32725, Aug. 15, 1984; 49 FR 44461, Nov. 7, 1984]