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Sec. 1.6662-2(d)(1), Income Tax Regs. Under these regulations,
disclosure is adequate if and only if it is made on Form 8275 (or
Form 8275-R). Secs. 1.6662-3(c)(2) and -4(f)(1), Income Tax
Regs. Petitioners did not file Form 8275 for 1991 or 1992.7 For
returns due prior to the effective date of sections 1.6662-3(c),
and -4(f), Income Tax Regs., taxpayers were entitled to rely on
Notice 90-20, 1990-1 C.B. 328, as authority for the adequate
disclosure exception. Closely tracking the language of the
legislative history that directed the Secretary to provide for
such an exception, Notice 90-20 states that "disclosure must be
full and substantive and be clearly identified as being made to
avoid imposition of the accuracy-related penalty." Id. at 329;
H. Rept. 101-247 at 1393 (1989). Disclosure may be made on Form
8275. Alternatively, it may be made on the return, in which case
the front page of the return must bear the caption "DISCLOSURE
MADE UNDER SECTION 6662." Id. Petitioners' returns for 1989 and
1990 did not comply with these requirements and no Forms 8275
7For the first time in his reply brief, Mr. Kelly challenges
the validity of these regulations on the ground that they exceed
the scope of the Secretary's interpretive authority. Mr. Kelly
evidently believes that the conditions in the regulations for
adequate disclosure are too restrictive. The argument was raised
too late for consideration. Aero Rental v. Commissioner, 64 T.C.
331, 338 (1975). We note in passing, however, that as the
statute itself provides no exception to the negligence penalty
for adequate disclosure, we fail to see how invalidating the
regulations would serve petitioners' interest.
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