[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 476-478]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6661-4  Disclosure of certain information.

    (a) In general. Items (other than tax shelter items as defined in 
Sec.  1.6661-5(c)) for which there is adequate disclosure are treated as 
if such items were shown properly on the return for the taxable year in 
computing the amount of tax shown on the return. Thus, for purposes of 
section 6661, the tax attributable to such items is not included in the 
understatement for the year. (See

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paragraph (d)(2) of Sec.  1.6661-2.) Disclosure is adequate with respect 
to the tax treatment of an item on a return only if it is made on such 
return or in a statement attached thereto. Thus, disclosure with respect 
to a recurring item, such as the basis of recovery property, made on a 
return or statement attached thereto for one taxable year is not 
adequate disclosure with respect to the item for any other taxable year. 
(See paragraph (d) of this section for special rules relating to 
disclosure with respect to carrybacks and carryovers.)
    (b) Disclosure in attached statement--(1) In general. Disclosure 
will be adequate with respect to an item (or group of similar items, 
such as the specific deduction of business bad debts or the deduction of 
amounts paid or incurred for supplies by a taxpayer engaged in 
business), if it is made on a properly completed Form 8275 or if it 
takes the form of a statement attached to the return that includes the 
following:
    (i) A caption identifying the statement as disclosure under section 
6661.
    (ii) An identification of the item (or group of similar items) with 
respect to which disclosure is made.
    (iii) The amount of the item (or group of similar items).
    (iv) The facts affecting the tax treatment of the item (or group of 
similar items) that reasonably may be expected to apprise the Internal 
Revenue Service of the nature of the potential controversy concerning 
the tax treatment of the item (or items).
    (2) Disclosure of legal issue. In lieu of setting forth the facts 
affecting the tax treatment of an item (or group of similar items) in 
accordance with paragraph (b)(1)(iv) of this section, the taxpayer may 
set forth a concise description of the legal issue presented by such 
facts.
    (3) A concise description of the taxpayer's legal position with 
respect to the items.
    (4) Requirement of particularity. Disclosure is not adequate with 
respect to an item (or group of similar items) if it consists of 
undifferentiated information that is not arranged in a manner that 
reasonably may be expected to apprise the Internal Revenue Service of 
the identity of the item, its amount, and the nature of the potential 
controversy concerning the item (or items). For example, attachment to 
the return of an acquisition agreement generally will not constitute 
adequate disclosure of the issues involved in determining the basis of 
certain acquired assets.
    (c) Disclosure on return. The Commissioner may by revenue procedure 
prescribe the circumstances in which information provided on the return 
in accordance with the applicable forms and instructions will be 
adequate disclosure for purposes of section 6661.
    (d) Carryovers and carrybacks. In the case of a carryover or 
carryback attributable to the tax treatment of an item on a return to 
which section 6661 applies (see paragraph (b) of Sec.  1.6661-1 and 
paragraph (d)(2)(iv) of Sec.  1.6661-2), disclosure is adequate with 
respect to the item only if it is made on the return for the taxable 
year in which the item arises or in a statement attached thereto. In 
such a case, disclosure with respect to the item is not required on the 
return for the taxable year in which the carryover or carryback 
attributable to the item is taken into account.
    (e) Pass-through entities. In the case of items attributable to a 
pass-through entity (``pass-through items''), disclosure regarding the 
tax treatment of such items should be made on the return of the entity 
or on an attachment thereto. For this purpose, a pass-through entity is 
a partnership, an S corporation (as defined in section 1361(a)(1)), an 
estate, a trust, a regulated investment company (as defined in section 
851(a)), or a real estate investment trust (as defined in section 
856(a)). A taxpayer (partner, shareholder, or beneficiary) also may make 
adequate disclosure with respect to a pass-through item, however, if the 
taxpayer files a separate statement in duplicate, one copy attached to 
and filed with the taxpayer's return and the other copy filed with the 
Internal Revenue Service Center with which the return of the entity is 
required to be filed. Each statement filed shall relate to the pass-
through items of only one entity and shall include the following:

[[Page 478]]

    (1) An identification of the taxpayer and the entity by name, 
address, and taxpayer identification number.
    (2) The taxable year of the entity to which the disclosure relates.
    (3) An identification of the items with respect to which the 
taxpayer has made disclosure under this paragraph.
    (4) Such additional information as would be required for adequate 
disclosure with respect to the items under paragraphs (a), (b), and (d) 
of this section.
    (5) A notation to the effect that the statement is to be associated 
with the return of the entity.

[T.D. 8017, 50 FR 12017, Mar. 27, 1985]