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the tax attributable to such items is not
included in the understatement for that year.
(2) Circumstances where disclosure will not have
an effect. The rules of paragraph (e)(1) of this
section do not apply where the item or position
on the return is--
(i) Frivolous (as defined in � 1.6662-
3(b)(3));
(ii) Attributable to a tax shelter (as
defined in section 6662(d)(2)(C)(ii) and
paragraph (g)(2) of this section); or
(iii) Not properly substantiated, or
the taxpayer failed to keep adequate books
and records with respect to the item or
position.
(f) Method of making adequate disclosure--
(1) Disclosure statement. Disclosure is adequate
with respect to an item (or group of similar
items, such as amounts paid or incurred for
supplies by a taxpayer engaged in business) or a
position on a return if the disclosure is made on
a properly completed form attached to the return
or to a qualified amended return (as defined in �
1.6664-2(c)(3)) for the taxable year. In the
case of an item or position other than one that
is contrary to a regulation, disclosure must be
made on Form 8275 (Disclosure Statement); in the
case of a position contrary to a regulation,
disclosure must be made on Form 8275-R
(Regulation Disclosure Statement).
(2) Disclosure on return. The Commissioner may
by annual revenue procedure (or otherwise)
prescribe the circumstances under which
disclosure of information on a return (or
qualified amended return) in accordance with
applicable forms and instructions is adequate.
If the revenue procedure does not include an
item, disclosure is adequate with respect to that
item only if made on a properly completed Form
8275 or 8275-R, as appropriate, attached to the
return for the year or to a qualified amended
return.
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