IRS seeks to scrap basis‑shifting TOI reporting regulations

The IRS issued proposed regulations (REG-108921-25) on Thursday that would remove the final basis-shifting transaction-of-interest (TOI) regulations that were issued in January 2025 (T.D. 10028).

Taxpayers and their material advisers criticized the final regulations “as imposing complex and burdensome compliance obligations on businesses,” the preamble to the proposed regulations said.

The IRS is proposing withdrawal of the Regs. Sec. 1.6011-18 basis-shifting TOI regulations issued in January 2025 that identified several types of partnership related-party basis-adjustment transactions and

substantially similar transactions as TOIs, a type of reportable transaction. The IRS had issued its intent to remove the regulations in Notice 2025-23, issued in April.

The proposed removal of the basis-shifting TOI regulations would be effective on the date the final regulations are published, the preamble said. But the IRS intends for the final regulations to provide that participants and material advisers may treat the removal as having occurred on Jan. 14, 2025, which was the applicability date of the final regulations.

That 2025 applicability date would allow those groups to treat the final regulations “as having never taken effect,” the preamble said. Those groups also may continue to rely on Notice 2025-23 until the proposed removal becomes final, the IRS said.

The 2025 final regulations made several changes to the proposed regulations (REG-124593-23) that the IRS issued in June 2024, including an increased dollar threshold for basis increase in a TOI. Instead of the $5 million threshold in the proposed regulations, the final regulations set a threshold of $25 million for tax years before 2025 and $10 million for later tax years.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.