- 17 -
tax opinion letter referenced in the private placement
memorandum. However, the memorandum, and presumably the letter
itself, did not refer to any specific authority for deducting the
loss based on the research and experimental expense deduction.
Adequate disclosure, another defense to the substantial
understatement addition to tax, 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. Sec.
1.6661-4(b), (c), Income Tax Regs. Petitioners did not attach
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 the Commissioner to
identify the potential controversy involved. Schirmer v.
Commissioner, 89 T.C. 277, 285-286 (1987). Merely claiming the
loss without further explanation, as petitioners did in this
case, was not sufficient to alert respondent to the controversial
section 174 deduction of which the partnership loss consisted.
See, e.g., Hunt v. Commissioner, supra; Robnett v. Commissioner,
supra.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011