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holdings make it clear that petitioners have substantial
understatements for 1986, 1987, and 1988.)
If an item is not attributable to a tax shelter, then the
understatement shall be reduced on account of the item, and the
addition to tax accordingly reduced, if (1) the taxpayer’s
treatment of the item was based on substantial authority, or (2)
the taxpayer adequately disclosed on the tax return or in a
statement attached to the tax return the relevant facts affecting
the item’s tax treatment. Sec. 6661(b)(2)(B).
Petitioners were not involved with a tax shelter, and they
attached a note to their tax returns explaining that the
carryover loss they claimed originated from a 1983 net operating
loss from business property seized by the Army Corps of
Engineers. We believe that this disclosure is adequate in the
context of the instant case.
We hold for petitioners on this issue.
To reflect the foregoing, and respondent’s concessions, see
supra note 2,
Decision will be entered
under Rule 155.
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