A prospective transaction is one that has not yet occurred. An incomplete transaction or issue is one for which the tax consequences may be affected by events that have not yet occurred. This means that the tax treatment of such transactions or issues is still uncertain and can change based on future developments.
The IRS has specific guidelines on how to handle these types of transactions, particularly within the Compliance Assurance Process (CAP). CAP teams are advised not to discuss the tax implications of any transaction or item until the tax treatment can no longer be affected by future events. This is to avoid providing premature or potentially misleading guidance that could influence the taxpayer's actions or lead to claims of reliance or disparate treatment.
For example, if a taxpayer is considering a transaction that involves a significant tax implication, such as a merger or acquisition, the CAP team should refrain from discussing the tax consequences until the transaction is finalized and all relevant facts are known. This ensures that any tax advice given is based on complete and accurate information, thereby reducing the risk of errors or disputes later on.
In summary, a prospective transaction is one that is planned but not yet executed, and an incomplete transaction is one where the final tax consequences are still dependent on future events. The IRS's approach to these transactions is to avoid discussing their tax implications until all relevant facts are known and the transaction is complete.
Sources:
PMTA 01233
ECC 200944040
IRM Part 4. Examining Process. Chapter 32. Abusive Transactions. Section 1. Process Guide for Combating Abusive Tax Avoidance Transactions
Contingent Debt or Open Transaction?
TAM 8714009
