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of the potential controversy concerning the item". Sec. 1.6661-
4(b)(3), Income Tax Regs.
For purposes of section 6661(b)(2)(B)(ii), merely listing
items such as income, expenses, and depreciation on a tax return
generally is treated by the courts as not constituting sufficient
disclosure of the nature of the potential controversy concerning
the item. Accardo v. Commissioner, 942 F.2d 444, 453 (7th Cir.
1991), affg. 94 T.C. 96 (1990); Schirmer v. Commissioner, 89 T.C.
277, 286 (1987).
Respondent, in Rev. Proc. 89-11, 1989-1 C.B. 797, provides a
safe harbor exception under which the listing of certain types of
items on an income tax return will be deemed adequate disclosure
for purposes of section 6661. Business interest expense,
however, does not qualify as one of the items under the safe
harbor exception.
Under the adequate disclosure standard of section 6661,
greater disclosure is required than the disclosure required under
section 6501(e)(1)(A). Staff of Joint Comm. on Taxation, General
Explanation of the Revenue Provisions of the Tax Equity and
Fiscal Responsibility Act of 1982, at 218 (J. Comm. Print 1982).
The disclosure standard under section 6501(e)(1)(A) has been held
to require only an adequate “clue” to enable respondent to
identify and investigate the item. University Country Club, Inc.
v. Commissioner, 64 T.C. 460, 469-470 (1975) (citing Colony, Inc.
v. Commissioner, 357 U.S. 28, 36 (1958)).
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Last modified: May 25, 2011