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Mr. Kelly contests respondent's determination on the ground
that petitioners adequately disclosed the facts relevant to their
deduction of Mr. Kelly's trading losses. For purposes of section
6661, disclosure is adequate if it is made on a properly
completed Form 8275, on a statement attached to the return in a
form prescribed by the regulations, or on the return, provided
that the taxpayer provides sufficient facts to enable the
Internal Revenue Service to identify the potential controversy.
Schirmer v. Commissioner, 89 T.C. 277, 285-286 (1987); S. Rept.
97-494 at 274 (1982); sec. 1.6661-4(b), Income Tax Regs. The
Schedules C filed with petitioners' tax returns for 1986 and 1987
show the computation of the net loss and identify Mr. Kelly's
principal business as "options dealer". Petitioners did not
disclose the relevant facts affecting the tax treatment of the
losses. Although the identification of Mr. Kelly's business as
"options dealer" is highly relevant, it was conclusory, and we
have found it to be inaccurate. The scant information on the
1986 and 1987 returns is consistent with the position that the
losses are ordinary, and would not have apprised the Internal
Revenue Service of a potential controversy over characterization.
The additions to tax under section 6661 are sustained.5
5Mr. Kelly also contests respondent's method of computing
petitioners' liability for the addition to tax under sec. 6661.
He contends that in computing the amount of the "underpayment"
for purposes of sec. 6661, respondent improperly failed to give
(continued...)
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