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understatement is reduced by any portion attributable to an
item if there is or was substantial authority for the
taxpayer's treatment of the item, or if the relevant facts
affecting the item's tax treatment are adequately disclosed
in the return or in a statement attached thereto. Sec.
6662(d)(2)(B).
Petitioner argues that for each of the years in
issue the understatement is reduced, pursuant to section
6662(d)(2)(B)(ii), by the portion thereof which is
attributable to the personal holding company tax adjust-
ment because that "issue was adequately disclosed and 'set
forth' in each of the tax returns filed for the years 1989
through 1994." In the case of petitioner's 1994 return,
petitioner points to the fact that there is attached
thereto a Schedule PH, U.S. Personal Holding Company (PHC)
Tax, setting forth petitioner's position that it is not
subject to the tax, accompanied by various materials that
discuss personal holding companies and a document entitled
"Note #1 - Schedule PH Explanation" that states as follows:
CHAR-LIL CORPORATION INCOME CONSISTS OF INTEREST
INCOME FROM INSTALLMENT SALES OF REAL PROPERTY
DERIVED IN THE ORDINARY COURSE OF TRADE OR
BUSINESS AND RENTAL INCOME FROM REAL ESTATE OWNED
BY THE CORPORATION.
CHAR-LIL CORPORATION'S ONLY BUSINESS IS THAT OF
REAL ESTATE OPERATION, INVOLVING SALES,
PURCHASES, RENTALS, ETC. THE INTEREST INCOME
THAT IS RECEIVED FROM INSTALLMENT SALES OF REAL
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