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show that he reasonably believed that the tax treatment claimed
was more likely than not proper. See sec. 6661(b)(2)(C)(i)(II).
Second, disclosure, whether or not adequate, will not reduce the
amount of the understatement. See sec. 6661(b)(2)(C)(i)(I).
Substantial authority exists when “the weight of authorities
supporting the treatment is substantial in relation to the weight
of the authorities supporting contrary positions.” Sec. 1.6661-
3(b)(1), Income Tax Regs. Petitioners argue that no authority,
other than the statute itself, existed at the time they claimed
the loss. Lack of authority, however, necessarily cannot provide
the substantial authority required under the statute and
regulations.
Adequate disclosure may be made either in a statement
attached to the return or on the return itself if in accordance
with the requirements of Rev. Proc. 83-21, 1983-1 C.B. 680. See
sec. 1.6661-4(b), (c), Income Tax Regs. Nothing in the record
indicates petitioners attached such a statement to their 1982
return. Rev. Proc. 83-21, applicable to tax returns filed in
1983, lists information which is deemed sufficient disclosure
with respect to certain items, none of which are involved in this
case. If disclosure is not made in compliance with the
regulations or the revenue procedure, adequate disclosure on the
return may still be satisfied if sufficient information is
provided to enable respondent to identify the potential
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