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attributable to the foreign tax credits which petitioner claimed
with respect to the $20 million dividend that it reported it
received from ITC and that that understatement is substantial
within the meaning of section 6662(d)(1)(A) and (B). In support
of that determination, respondent advances two alternative
positions. First, respondent argues: The disputed transaction
is a tax shelter within the meaning of section 6662(d)(2)(C)(ii);
petitioner’s treatment of the disputed transaction in peti-
tioner’s 1993 return is not supported by substantial authority;
petitioner did not reasonably believe that its treatment of the
disputed transaction was more likely than not the proper treat-
ment; and petitioner did not have reasonable cause for, or act in
good faith with respect to, its treatment of the disputed trans-
action in petitioner’s 1993 return. Alternatively, respondent
argues that, even if the disputed transaction were not a tax
shelter within the meaning of 6662(d)(2)(C)(ii), petitioner’s
treatment of the disputed transaction is not supported by sub-
stantial authority; the relevant facts affecting the tax treat-
ment of the disputed transaction were not adequately disclosed in
petitioner’s 1993 return or in the October 11, 1996 disclosure
letter; and petitioner did not have reasonable cause for, or act
in good faith with respect to, its treatment of the disputed
transaction in petitioner’s 1993 return (respondent’s alternative
position).
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