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treatment of any item with respect to which the relevant
facts affecting the item's tax treatment are adequately
disclosed in the return or in an attached statement. See
sec. 6661(b)(2)(B). In the case of a tax shelter, however,
the reduction for adequate disclosure does not apply, and
the reduction based upon substantial authority for the
treatment of the item does not apply unless the taxpayer
reasonably believed at the time the return was filed that
the tax treatment claimed "was more likely than not the
proper treatment." Sec. 6661(b)(2)(C)(i). A taxpayer can
establish such a reasonable belief if the taxpayer in good
faith relies on the opinion of a professional tax adviser
that unambiguously states that the tax adviser "concludes
that there is a greater than 50-percent likelihood that the
tax treatment of the item will be upheld in litigation if
the claimed tax treatment is challenged by the Internal
Revenue Service." Sec. 1.6661-5(d)(2), Income Tax Regs.
Therefore, in the case of an understatement attributable to
a tax shelter, a taxpayer must prove that: (1) There was
substantial authority for the tax treatment of an item; and
(2) the taxpayer reasonably believed that the tax treatment
of an item was more likely than not the proper treatment.
See sec. 6661(b)(2)(C)(i); Mele v. Commissioner, T.C. Memo.
1988-409.
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