- 34 -
the year under consideration, respondent provided guidance
totaxpayers by means of Notice 90-20, 1990-1 C.B. 328, and Rev.
Proc. 90-16, 1990-1 C.B. 477.10
Rev. Proc. 90-16, section 4(b)(4), 1990-1 C.B. at 478,
provides that, for purposes of reducing any understatement of
income tax under section 6662(d), additional disclosure of facts
with respect to an issue involving the reasonableness of
officers' compensation is unnecessary, where the Schedule E
(Compensation of Officers) to the Form 1120 is completed in a
clear manner and in accordance with its instructions. Section
4(b)(4) of Rev. Proc. 90-16 further requires that the time
devoted by the officer to the business be expressed as a specific
percentage.
In addition, section 6664(c)(1) provides that a penalty
under section 6662 shall not be imposed on any portion of an
underpayment if the taxpayer shows reasonable cause for such
9(...continued)
treatment of the item. However, this amendment is effective only
for returns the due dates for which (determined without regard to
extensions) are after Dec. 31, 1993, and is not applicable to the
instant case. OBRA 1993, sec. 13251(b), 107 Stat. 531.
Petitioner's return for the year ended June 30, 1990, was due on
or before Sept. 15, 1990. Sec. 6072(b).
10Sec. 1.6662-4(e) and (f), Income Tax Regs., is not
applicable because they were issued to apply prospectively with
respect to income tax returns due after Dec. 31, 1991. See T.D.
8381, 1992-1 C.B. 374, 375. However, absent further guidance,
taxpayers may rely on the rules set forth in Notice 90-20, 1990-1
C.B. 328, 330, and Rev. Proc. 90-16, 1990-1 C.B. 477.
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011