A material advisor in regard to a tax shelter is any person who:
1. Has provided any material aid or advice in order to help with the organizing, promoting, selling, implementing, insuring, or carrying out any reasonable transaction and
2. Derives gross income in excess of a threshold amount determined by the IRS for the assistance or advice.
All material advisors are required to register with the IRS and receive a reportable transaction number. The advisor must provide this number to all taxpayers and other material advisors in the event that he or she acts as a material advisor.
Every material advisor to a reportable transaction is required to file Form 8918 (Material Advisor Disclosure Statement) with the Office of Tax Shelter Analysis. This form must be filed with the IRS by the last day of the month that follows the calendar quarter end in which the advisor became a material advisor to a reportable transaction.
Gross Income Threshold
Generally, the threshold amount for the derived gross income is $50,000 for a reportable transaction in which substantially all of the tax benefits are provided to individuals. In all other cases, the threshold is increased to $250,000. The IRS considers 70% or more as qualifying for the substantially all the tax benefit given to an individual.