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Petitioner maintains that the information set forth in the
October 11, 1996 disclosure letter was sufficient under Revenue
Procedure 94-69 to constitute adequate disclosure of the disputed
transaction under section 6662(d)(2)(B)(ii) and the regulations
thereunder.
On the record before us, we agree with respondent that the
October 11, 1996 disclosure letter did not reasonably apprise the
IRS of the nature of the controversy or potential controversy
that the disputed transaction raised, as required by Revenue
Procedure 94-69. The only potential controversy revealed in that
letter was a redetermination of the foreign tax credits claimed
by petitioner because of a potential deficit in ITC’s post-1986
pool of foreign taxes (ITC’s pool of foreign taxes).19 The
October 11, 1996 disclosure letter, by failing to disclose all
the steps of the disputed transaction, did not provide informa-
tion that reasonably could have been expected to apprise the IRS
that: (1) Petitioner and ITC engaged in the disputed transaction
solely to generate foreign tax credits; (2) the terms of the
guarantee and assignment agreement required that any money
received by petitioner from ITC be held in trust for and paid
19The reason for a possible redetermination of ITC’s pool of
foreign taxes disclosed in the October 11, 1996 disclosure letter
was the possibility that, for reasons undisclosed by the record,
a prior claimed dividend from ITC to petitioner would be charac-
terized as a repayment of a loan and a reassessment by Canada of
ITC’s Canadian taxes.
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