Instructions For Form 8275 - Disclosure Statement

Department of the Treasury

Instructions for Form 8275

Internal Revenue Service

(Rev. May 2001)

Disclosure Statement

Example. Generally, you will have

standard applicable to preparers. See

General Instructions

met the requirements for adequate

Regulations section 1.6694-2(c)(2).

Section references are to the Internal

disclosure of a charitable contribution

The penalty will not be imposed on any

Revenue Code unless otherwise noted.

deduction, if you complete the

part of an underpayment if there was

contributions section of Schedule A (Form

reasonable cause for your position and

Purpose of Form

1040) and supply all the required

you acted in good faith in taking that

information. If you make a contribution of

Form 8275 is used by taxpayers and

position.

property other than cash that is over

income tax return preparers to disclose

If you failed to keep proper books and

$500, the form required by the Schedule

items or positions, except those taken

records to substantiate items properly,

A instructions must be attached to your

contrary to a regulation, that are not

you cannot avoid the penalty by

return.

otherwise adequately disclosed on a tax

disclosure. Also, you cannot avoid the

return to avoid certain penalties. The form

penalty by disclosure if the position is

How To File

is filed to avoid the portions of the

frivolous.

accuracy-related penalty due to disregard

File Form 8275 with your original tax

of rules or a substantial understatement

Substantial Understatement

return. Keep a copy for your records. You

of income tax if the return position has a

may be able to file Form 8275 with an

An understatement is the excess of:

•

reasonable basis. It can also be used for

amended return. See Regulations

The amount of tax required to be

disclosures relating to preparer penalties

sections 1.6662-4(f) and 1.6664-2(c)(3)

shown on the return for the tax year over

•

for understatements due to unrealistic

for more information.

The amount of tax shown on the return

positions or disregard of rules.

for the tax year, reduced by any rebates.

To make adequate disclosure for items

Caution. The portion of the accuracy-

reported by a pass-through entity, you

There is a substantial

related penalty attributable to the

must complete and file a separate Form

understatement of income tax if the

following types of misconduct cannot be

8275 for items reported by each entity.

amount of the understatement for any tax

avoided by disclosure on Form 8275:

year exceeds the greater of:

Carrybacks, carryovers, and recurring

•

Negligence

items. If you disclose carryover items on

1. 10% of the tax required to be

•

Substantial understatement of tax on a

a return in the year they originated, you

shown on the return for the tax year or

tax shelter item.

do not have to file another Form 8275 for

2. $5,000 ($10,000 for a corporation

•

Substantial valuation misstatement

those items for the carryover tax years.

other than an S corporation or a personal

under chapter 1.

holding company as defined in section

•

If you disclose carryback items on a

Substantial overstatement of pension

542).

return in the year they originated, you do

liabilities.

•

not have to file another Form 8275 for

Substantial estate or gift tax valuation

For purposes of the substantial

those items for the carryback years.

understatements.

understatement portion of the accuracy-

However, if you disclose items of a

related penalty, the amount of the

recurring nature (such as depreciation

Who Should File

understatement will be reduced by the

expense), you must file Form 8275 for

part that is attributable to:

Form 8275 is filed by individuals,

•

each tax year in which the item occurs.

An item (other than a tax shelter item),

corporations, pass-through entities, and

for which there was substantial authority

income tax return preparers. If you are

Accuracy-Related Penalty

for the treatment claimed at the time the

disclosing a position taken contrary to a

return was filed or on the last day of the

Generally, the accuracy-related penalty is

regulation, use Form 8275-R, Regulation

tax year to which the return relates.

20% of any portion of a tax underpayment

Disclosure Statement, instead of Form

•

An item (other than a tax shelter item)

attributable to:

8275.

that is adequately disclosed on this form

1. Negligence or disregard of rules or

and there is a reasonable basis for the

For items attributable to a pass-

regulations.

tax treatment of the item.

through entity, disclosure should be made

2. Substantial understatement of

on the tax return of the entity. If the entity

Note. In no event will a corporation be

income tax.

does not make the disclosure, the partner

treated as having a reasonable basis for

3. Any substantial valuation

(or shareholder, etc.) may make adequate

its tax treatment of an item attributable to

misstatement under chapter 1.

disclosure of these items.

a multi-party financing transaction entered

4. Any substantial overstatement of

into after August 5, 1997, if the treatment

pension liabilities.

Exception to filing Form 8275.

does not clearly reflect the income of the

Guidance is published annually in a

corporation.

However, the penalty is 40% of any

revenue procedure in the Internal

•

portion of a tax underpayment attributable

A tax shelter item (other than a

Revenue Bulletin that identifies

to one or more gross valuation

corporate tax shelter item) if (a) there was

circumstances when an item reported on

misstatements in 3 and 4 above if the

substantial authority for the treatment at

a return is considered adequate

applicable dollar limitation under section

the time the return was filed or on the last

disclosure for purposes of the substantial

6662(e)(2) is met.

day of the tax year to which the return

understatement aspect of the accuracy-

relates, and (b) you reasonably believed

related penalty and for avoiding the

Generally, you can avoid the disregard

that the tax treatment of the item was

preparer’s penalty relating to

of rules and substantial understatement

more likely than not the proper tax

understatements due to unrealistic

portions of the accuracy-related penalty if

treatment.

positions. See the example. You do not

the position is adequately disclosed and

have to file Form 8275 for items that meet

the position has at least a reasonable

Note. For corporate tax shelter

the requirements listed in this revenue

basis. Reasonable basis is a significantly

transactions, the only exception to the

procedure.

higher standard than the not frivolous

substantial understatement portion of the

Cat. No. 62063F

Instructions For Form 8275 - Disclosure Statement - 2001

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