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which there is adequate disclosure are treated as
if such items were shown properly on the return
for the taxable year in computing the amount of
tax for purposes of section 6661, shown on the
return. Thus, the tax attributable to such items
is not included in the understatement for the
year. (See paragraph (d)(2) of � 1.6661-2.)
Disclosure is adequate with respect to the tax
treatment of an item on a return only if it is
made on such return or in a statement attached
thereto. Thus, disclosure with respect to a
recurring item, such as the basis of recovery
property, made on a return or statement attached
thereto for one taxable year is not adequate
disclosure with respect to the item for any other
taxable year. See paragraph (d) of this section
for special rules relating to disclosure with
respect to carrybacks and carryovers.
(b) Disclosure in attached statement--
(1) In general. Disclosure will be adequate with
respect to an item (or group of similar items,
such as the specific deduction of business bad
debts or the deduction of amounts paid or
incurred for supplies by a taxpayer engaged in
business), if it is made on a properly completed
Form 8275 or if it takes the form of a statement
attached to the return that includes the
following:
(i) A caption identifying the statement
as disclosure under section 6661.
(ii) An identification of the item (or
group of similar items) with respect to
which disclosure is made.
(iii) The amount of the item (or group
of similar items).
(iv) The facts affecting the
tax treatment of the item (or
group of similar items) that
reasonably may be expected to
apprise the Internal Revenue
Service of the nature of the
potential controversy con-cerning
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