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


Instructions for
Department of the Treasury
Internal Revenue Service
Form 8275-R
(Rev. January 2005)
(Use with the February 2002 revision of Form 8275-R.)
Regulation Disclosure Statement
return of the entity. If the entity does not
5. Any substantial estate or gift tax
General Instructions
make the disclosure, the partner (or
valuation understatement.
Section references are to the Internal
shareholder, etc.) may make adequate
However, the penalty is 40% of any
Revenue Code unless otherwise noted.
disclosure of these items.
portion of a tax underpayment attributable to
Purpose of Form
one or more gross valuation misstatements
How To File
in (3), (4), or (5) above if the applicable
Form 8275-R is used by taxpayers and
When a return position is contrary to
dollar limitation under section 6662(h)(2) is
income tax preparers to disclose positions
regulations, you must file Form 8275-R. File
taken on a tax return that are contrary to
all Forms 8275-R with your original tax
Reasonable basis. Generally, you can
Treasury regulations. The form is filed to
return. Keep a copy for your records. You
avoid the disregard of regulations and
avoid the portions of the accuracy-related
also may be able to file Forms 8275-R with
substantial understatement portions of the
penalty due to disregard of regulations or to
an amended return. See Regulations
accuracy-related penalty if the position is
a substantial understatement of income tax
sections 1.6662-4(f) and 1.6664-2(c)(3) for
adequately disclosed and the position has at
for non-tax shelter items if the return
more information.
least a reasonable basis. To avoid the
position has a reasonable basis. It can also
To make adequate disclosure for items
disregard of regulations portion of the
be used for disclosures relating to the
reported by a pass-through entity, you must
accuracy-related penalty, the position taken
preparer penalties for income tax
complete and file a separate Form 8275-R
must also represent a good-faith challenge
understatements due to positions taken
for items reported by each entity.
to the validity of the regulation. Reasonable
contrary to regulations.
basis is a relatively high standard of tax
Carrybacks, carryovers, and recurring
The portion of the accuracy-related
reporting that is significantly higher than not
items. Carryover items must be disclosed
penalty attributable to the following
frivolous or not patently improper. The
in the tax year in which they originated. You
types of misconduct cannot be
reasonable basis standard is not satisfied by
do not have to file another Form 8275-R for
avoided by disclosure on Form 8275-R:
a return position that is merely arguable.
those items for the tax years in which the
carryover is taken into account.
The penalty will not be imposed on any
Disregard of rules.
part of an underpayment if there was
Carryback items must be disclosed for
Substantial understatement of tax on a
reasonable cause for your position and you
the tax year in which they originated. You do
tax shelter item.
acted in good faith in taking that position.
not have to file another Form 8275-R for
Substantial valuation misstatement under
those items for the tax years in which the
If you failed to keep proper books and
chapter 1.
carryback is taken into account.
records or failed to substantiate items
Substantial overstatement of pension
properly, you cannot avoid the penalty by
However, if you disclose items that are of
a recurring nature (such as depreciation
Substantial estate or gift tax valuation
expense), you must file Form 8275-R for
Substantial Understatement
each tax year in which the item occurs.
An understatement is the excess of:
Because of the importance to the
If you are disclosing a position that is
self-assessment system of disclosing
1. The amount of tax required to be
contrary to a regulation, and the position
positions contrary to regulations, the
shown on the return for the tax year, over
relates to a reportable transaction as
requirements for making such disclosures
2. The amount of tax shown on the
defined in Regulations section 1.6011-4(b),
are stringent.
return for the tax year, reduced by any
you must also make the disclosure required
The disclosure is adequate only if it is
by Regulations section 1.6011-4(b). See
made separately on a Form 8275-R, and
Form 8886, Reportable Transaction
The penalty for reckless or intentional
There is a substantial understatement of
Disclosure Statement, its instructions, and
income tax if the amount of the
disregard of a regulation may be avoided by
Rev. Proc. 2004-45, which is on page 140 of
understatement for any year exceeds the
disclosure only if the position represents a
Internal Revenue Bulletin 2004-31 at http://
good faith challenge to the validity of the
greater of:
regulation and has a reasonable basis.
1. 10% of the tax required to be shown
on the return for the tax year, or
Instead of Form 8275-R, use Form 8275,
Accuracy-Related Penalty
2. $5,000 ($10,000 for a corporation
Disclosure Statement, for the disclosure of
Generally, the accuracy-related penalty is
other than an S corporation or a personal
items or positions which are not contrary to
20% of any portion of a tax underpayment
holding company as defined in section 542).
regulations but which are not otherwise
attributable to:
adequately disclosed.
For tax years beginning after October 22,
1. Negligence or disregard of rules or
2004, an understatement of a corporation
Who Should File
(other than an S corporation or a personal
2. Substantial understatement of income
Form 8275-R is filed by individuals,
holding company) is substantial if it exceeds
corporations, pass-through entities, and
the lesser of:
3. Any substantial valuation
income tax return preparers.
misstatement under chapter 1.
1. 10% of the tax required to be shown
For items attributable to a pass-through
4. Any substantial overstatement of
on the return for the tax year (or, if greater,
entity, disclosure should be made on the tax
pension liabilities.
$10,000), or
Cat. No. 14317I


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