- 24 -
Respondent's regulations provide two types of disclosure
under section 6662(b)(2): Disclosure in attachments attached to
the return, sec. 1.6662-4(f)(1), Income Tax Regs., and disclosure
on the return, sec. 1.6662-4(f)(2), Income Tax Regs. Petitioners
did not attach a statement to their return; therefore we look to
the return to decide whether disclosure was adequate.
The Commissioner may by annual revenue procedure (or
otherwise) prescribe the circumstances under which disclosure of
information on a return in accordance with applicable forms and
instructions is adequate. Sec. 1.6662-4(f)(2), (5), Income Tax
Regs. The Commissioner issued Rev. Proc. 93-33, 1993-2 C.B. 470
(extending the application of Rev. Proc. 92-23, 1992-1 C.B. 737,
to 1992 returns), Rev. Proc. 94-36, 1994-1 C.B. 682, and Rev.
Proc. 94-74, 1994-2 C.B. 823, for tax years using 1992, 1993, and
1994 tax forms, respectively, which identify circumstances under
6(...continued)
understatement shall be reduced by that portion of the
understatement which is attributable to
(ii) any item if--
(I) the relevant facts affecting the item's tax
treatment are adequately disclosed in the return or in a
statement attached to the return, and
(II) there is a reasonable basis for the tax treatment
of such item by the taxpayer.
Thus, for 1993 and 1994, petitioners must not only
adequately disclose the relevant facts affecting the item's tax
treatment, but must also have a reasonable basis for such tax
treatment. Due to our finding that petitioners did not disclose
the relevant facts affecting the item's tax treatment, we do not
address whether petitioners had a reasonable basis for the tax
treatment of the item.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011