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Section 1.6662-3(b)(3), Income Tax Regs., states that a
"frivolous" position is one that is "patently improper".
The above provisions of the regulations governing the
adequate disclosure exception, former section 1.6662-4(e)
and (f), Income Tax Regs., were effective for income tax
returns due after December 31, 1991. Former sec. 1.6662-
2(d), Income Tax Regs. Thus, for 1991 and 1992 returns,
the amount of the understatement is reduced with respect
to an item if there is adequate disclosure of the item
and the tax treatment of the item is not frivolous.
Regarding income tax returns due before the effective
date of the initial regulations promulgating rules for
making adequate disclosure under section 6662(d)(2)(B)(ii),
i.e., income tax returns due before December 31, 1991
(determined without regard to extensions of time for
filing), the Internal Revenue Service announced that the
rules applicable to section 6661 would be used for
determining what constitutes adequate disclosure under
section 6662(d)(2)(B). Notice 90-20, 1990-1 C.B. 328.
The regulations under former section 6661 governing the
adequate disclosure exception, former section 1.6661-4,
Income Tax Regs., provided as follows:
� 1.6661-4 Disclosure of certain information
(a) In general. Items (other than tax
shelter items as defined in � 1.6661-5(c)) for
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