- 31 -
The section 6661 addition to tax is not applicable,
however, if there was substantial authority for the position
taken on the taxpayer's return, or adequate disclosure in the
return of the relevant facts affecting the treatment of the item.
Sec. 6661(b)(2)(B)(i) and (ii).
Petitioners have not contended that there was substantial
authority for their reporting position. Petitioners contend that
the tax treatment of the proceeds of the sale of IMED's stock
options was adequately disclosed in their return as filed.
Respondent disputes that petitioners adequately disclosed the
item in question.
In Schirmer v. Commissioner, 89 T.C. 277, 285-286 (1987),
we explained that the regulations provide for two types of
adequate disclosure for purposes of section 6661(b)(2)(B)(ii):
Disclosure in a statement attached to the return or disclosure on
the return pursuant to the Commissioner's revenue procedures.
Sec. 1.6661-4(b) and (c), Income Tax Regs. In addition, we noted
that a taxpayer may satisfy the adequate disclosure requirement
of section 6661(b)(2)(B)(ii) by providing on the return
sufficient information to enable the Commissioner to identify the
potential controversy involved.
Petitioners' expert witness, John J. Monaco (Monaco), was
previously Assistant Commissioner (Examination) for respondent,
where he was an employee for 33 years. Monaco opined that the
zero basis reported on the return would be adequate disclosure of
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011