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4(d)(3)(ii), Income Tax Regs. An authority which is materially
distinguishable on its facts or otherwise inapplicable to the tax
treatment at issue is not particularly relevant and is not
substantial authority. Id. There may be substantial authority
for the tax treatment of an item despite the absence of certain
types of authority. Id. Thus, a taxpayer may have substantial
authority for a position even where it is supported only by a
well-reasoned construction of the pertinent statutory provision
as applied to the relevant facts. Id.
The amount of the understatement may also be reduced to the
extent that it is attributable to, inter alia, an item for which
the relevant facts affecting the item’s tax treatment were
adequately disclosed in the return or in a statement attached to
the return. Sec. 6662(d)(2)(B)(ii). In order to satisfy the
adequate disclosure standard of section 6662(d)(2)(B)(ii), a
taxpayer must disclose the relevant facts on a properly completed
form (i.e., Form 8275, Disclosure Statement (Form 8275)) attached
to the return or to a qualified amended return. Sec.
1.6662-4(f)(1), Income Tax Regs. In Revenue Procedure 94-69,
1994-2 C.B. 804 (Revenue Procedure 94-69), the Internal Revenue
Service (IRS) promulgated procedures under which certain taxpay-
ers15 may meet the requirements for adequate disclosure under
15The parties do not dispute that petitioner is the type of
taxpayer to which the rules of Revenue Procedure 94-69 apply.
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