Breaking News: Don't Become a Material Advisor
Accountants, insurance professionals and others need to be careful that they don’t become what the IRS calls material advisors. If they sell or give advice, or sign tax returns for abusive, listed or similar plans; they risk a minimum $100,000 fine. Their client will then probably sue them after having dealt with the IRS. In 2010, the IRS raided the offices of Benistar in Simsbury, Conn., and seized the retirement benefit plan administration firm’s files and records. In McGehee Family Clinic, the Tax Court ruled that a clinic and shareholder’s investment in an employee benefit plan marketed under the name “Benistar” was a listed transaction because it was substantially similar to the transaction described in Notice 95-34 (1995-1 C.B. 309). This is at least the second case in which the court has ruled against the Benistar welfare benefit plan, by denominating it a listed transaction. The McGehee Family Clinic enrolled in the Benistar Plan in May 2001 and claimed deductions for contributions to it in 2002 and 2005. The returns did not include a Form 8886, Reportable Transaction Disclosure Statement, or similar disclosure. The IRS disallowed the latter deduction and adjusted the 2004 return of shareholder Robert Prosser and his wife to include the $50,000 payment to the plan. Click here to read more.