Final Rules on Gain Recognition Retain ‘Willful Failure’ Relief Standard

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Nov. 18 — Long-awaited IRS final rules on gain recognition agreements help taxpayers in many ways but offer challenges in others, practitioners told Bloomberg BNA.

While mostly positive, the rules issued Nov. 18 are “a mixed blessing,” said Sean Mullaney, a director in the International Tax Services Group at PricewaterhouseCoopers LLP.

In the rules (T.D. 9704, RIN 1545-BK65), the Internal Revenue Service retained the approach taken in the proposed rules (REG-140649-11) that eliminates the need for taxpayers to prove reasonable cause in seeking relief from penalties and gain recognition after failure to fully or properly file a GRA.

Instead, taxpayers must show that it wasn't a “willful failure”—which is considered an easier standard to meet than reasonable cause (21 DTR G-3, 1/31/13).