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2. $10,000,000.

In cases where any part of the

tax treatment of the item, or a concise

understatement of the liability is due to a

description of the legal issues presented by

For purposes of the substantial

willful attempt by the return preparer to

these facts; and

understatement portion of the

understate the liability, or if the

2. A statement explaining why you

accuracy-related penalty, the amount of the

understatement is due to reckless or

believe this regulation to be invalid.

understatement will be reduced by the part

intentional disregard of rules or regulations

that is attributable to the following items.

by the preparer, the preparer is subject to a

Disclosure will not be considered

•

An item (other than a tax shelter item) for

$1,000 penalty.

adequate unless (1) and (2) above

which there was substantial authority for the

are provided using Form 8275-R. For

CAUTION

A preparer is not considered to have

treatment claimed at the time the return was

example, your disclosure will not be

recklessly or intentionally disregarded a

filed or on the last day of the tax year to

considered adequate if you attach a copy of

regulation if the position is adequately

which the return relates.

an acquisition agreement to your tax return

disclosed, is not frivolous, and the position

•

An item (other than a tax shelter item) that

to disclose the issues involved in

represents a good faith challenge to the

is adequately disclosed on this form if there

determining the basis of certain acquired

validity of the regulation.

is a reasonable basis for the tax treatment of

assets. If Form 8275-R is not completed and

Note. For more information about the

the item. (In no event will a corporation be

attached to the return, the disclosure will not

accuracy-related penalty and preparer

treated as having a reasonable basis for its

be considered valid even if the information

penalties, and the means of avoiding these

tax treatment of an item attributable to a

in (1) and (2) above is provided.

penalties, see Regulations sections 1.6662,

multi-party financing transaction entered into

1.6664, and 1.6694.

after August 5, 1997, if the treatment does

Part III

not clearly reflect the income of the

Line 4. Contact your pass-through entity if

corporation.)

•

you do not know where its return was filed.

A tax shelter item (other than a corporate

Specific Instructions

However, for partners and S corporation

tax shelter item), for tax years ending before

Be sure to supply all of the information

shareholders, information for line 4 can be

October 23, 2004, if (a) there was

requested in Parts I and II and, if applicable,

found on the Schedule K-1 that you received

substantial authority for the treatment at the

Part III. Your disclosure will be considered

from the partnership or S corporation.

time the return was filed or on the last day of

adequate if you file Form 8275-R and supply

the tax year to which the return relates, and

the information requested in detail.

(b) you reasonably believed that the tax

Paperwork Reduction Act Notice. We ask

treatment of the item was more likely than

Use Part IV on page 2 if you need more

for the information on this form to carry out

not the proper tax treatment.

space for Part I or II. Indicate the

the Internal Revenue laws of the United

corresponding part and line number from

For corporate tax shelter transactions

States. You are required to give us the

page 1. You can use a continuation sheet(s)

(and for tax shelter items of other taxpayers

information if you wish to use this form to

if you need additional space. Be sure to put

for tax years ending after October 22, 2004),

make adequate disclosure to avoid the

your name and identifying number on each

the only exception to the substantial

portion of the accuracy-related penalty due

sheet.

understatement portion of the

to a substantial understatement of income

accuracy-related penalty is the reasonable

tax or disregard of regulations, or to avoid

Part I

cause exception. For more details, see

certain preparer penalties. We need it to

section 1.6664-4(e).

ensure that you are complying with these

Column (a). Enter a detailed citation for

laws and to allow us to figure and collect the

Tax shelter items. A tax shelter, for

each regulation for which you have taken a

right amount of tax.

purposes of the substantial understatement

contrary position.

portion of the accuracy-related penalty, is a

You are not required to provide the

Column (b). Identify the item by name.

partnership or other entity, plan, or

information requested on a form that is

If any item you disclose is from a

arrangement, with a significant purpose to

subject to the Paperwork Reduction Act

pass-through entity, you must identify the

avoid or evade federal income tax. For

unless the form displays a valid OMB control

item as such. If you disclose items from

transactions on or before August 5, 1997, a

number. Books or records relating to a form

more than one pass-through entity, you

tax shelter is a partnership or other entity,

or its instructions must be retained as long

must complete a separate Form 8275-R for

plan, or arrangement, whose principal

as their contents may become material in

each entity. Also, see How To File on

purpose is to avoid or evade federal income

the administration of any Internal Revenue

page 1.

tax.

law. Generally, tax returns and return

Column (c). Enter a complete description

information are confidential, as required by

A tax shelter item is any item of income,

of the item(s) you are disclosing.

section 6103.

gain, loss, deduction, or credit that is directly

Example. If an entertainment expense

or indirectly attributable to the principal or

The time needed to complete and file this

was reported in column (b), then list in

significant purpose of the tax shelter to

form will vary depending on individual

column (c) “theater tickets, catering

avoid or evade federal income tax.

circumstances. The estimated average time

expenses, and banquet hall rentals.”

is:

Income Tax Return Preparer

If you claim the same tax treatment for a

Penalties

group of similar items in the same tax year,

Recordkeeping . . . . . . .

3 hr., 35 min.

enter a description identifying the group of

A preparer who files an income tax return or

Learning about the law

items you are disclosing rather than a

claim for refund is subject to a $250 penalty

or the form . . . . . . . .

53 min.

separate description of each item within the

for taking a position which understates any

group.

part of the liability if:

Preparing and sending

•

Columns (d) through (f). Enter the location

The position has no realistic possibility of

the form to the IRS . .

59 min.

being sustained on its merits, and

of the item(s) by identifying the form number

•

If you have comments concerning the

or schedule and the line number in columns

The preparer knew (or reasonably should

(d) and (e) and the amount of the item(s) in

accuracy of these time estimates or

have known) of the position, and

•

suggestions for making this form simpler, we

The position is frivolous or not adequately

column (f).

would be happy to hear from you. See the

disclosed on the return or on the appropriate

Part II

instructions for the tax return with which this

disclosure statement.

form is filed.

The penalty will not apply if it can be

Your disclosure must include:

shown that there was reasonable cause for

1. A description of the relevant facts and

the understatement and that the preparer

the nature of the controversy affecting the

acted in good faith.

-2-

Instructions For Form 8275-R - Regulation Disclosure Statement - Department Of The Treasury - 2005 Page 2

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