21
The regulations specifically provide that the possibility
that an item will not be raised on audit, or that there will be
no audit, is not relevant in determining whether there is
substantial authority. Sec. 1.6662-4(d)(2), Income Tax Regs.
Petitioners' reliance on respondent's prior inaction is
unwarranted. Petitioners did not cite any authority to bolster
their assertions that there was substantial authority for their
returns, and we find none.
Petitioners point to Rev. Proc. 90-16, 1990-1 C.B. 477,
which describes what constitutes adequate disclosure for certain
items. Unfortunately, these less stringent requirements are only
applicable to the specific items enumerated in that revenue
procedure. Because none of those items were claimed by
petitioners, here the revenue procedure provides no assistance
for them. The disclosure must enable the Service to identify the
potential controversy involved. Schirmer v. Commissioner, supra
at 286 (citing S. Rept. 97-494 (Vol. 1), at 274 (1982)).
Petitioners did not attach a Form 8275 to their return, nor
did they attach a statement that identified itself as a
disclosure under section 6661. The requirement of adequate
disclosure is not satisfied merely by listing the deductions on
Schedule F attached to the tax return, and therefore we find that
there was no adequate disclosure.
If there was reasonable cause for the underpayment, and the
taxpayer acted in good faith, the penalty will not be imposed.
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