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Expectation to litigate. Do not

UTP must be the same unit of account

determines it is uncertain whether any

used by the taxpayer for GAAP or

determine a size for positions listed

deduction or amortization of this

modified GAAP.

because of an expectation to litigate.

expenditure is allowable. In the 2010

See the instructions for Parts I and II,

audited financial statements, the

In the case of audited financial

column (f), regarding ranking of these

corporation records a reserve with

statements prepared under accounting

positions.

respect to the amortization deduction to

standards other than GAAP or modified

be claimed in each tax year. The

GAAP, a corporation that issues

Affiliated groups. The determination

corporation has taken a tax position in

audited financial statements with a unit

of the size of a tax position taken in a

each of the 5 tax years because on

of account that is based upon the entire

tax return by an affiliated group filing a

each year’s tax return there would be

tax year may not use that unit of

consolidated return is to be determined

an adjustment to a line item on that

account for Schedule UTP. The

at the affiliated group level for all

return if the position taken in that year

corporation must instead identify a unit

members of the affiliated group.

is not sustained. The corporation must

of account based on similar principles

report the 2010 tax position on Part I of

Coordination with Other

applicable to GAAP or modified GAAP

Schedule UTP for the 2010 tax year. In

taxpayers, or use any other level of

Reporting Requirements

addition, the tax position to be taken in

detail that is consistently applied if that

A complete and accurate disclosure of

each of the 2011 to 2014 tax years

identification is reasonably expected to

a tax position on the appropriate year’s

must be reported on Part I of the

apprise the IRS of the identity and

Schedule UTP will be treated as if the

Schedule UTP filed with the tax return

nature of the issue underlying the tax

corporation filed a Form 8275,

for the respective tax year in which the

position taken on the tax return.

Disclosure Statement, or Form 8275-R,

tax position was taken. The result

Example 5. Unit of account.

Regulation Disclosure Statement,

would be the same if, instead of

Corporation A and Corporation B each

regarding the tax position. A separate

recording the reserve in 2010 for all of

have two individual research projects

Form 8275 or Form 8275-R need not

the tax positions taken in each of the

and each anticipates claiming a

be filed to avoid certain

five years, the corporation records a

research and development credit

accuracy-related penalties with respect

reserve in each year that specifically

arising out of their projects. Corporation

to that tax position.

relates to the tax position taken on the

A chooses each individual research

return for that year.

project as the unit of account for GAAP

Comprehensive

Example 8. Transition rule. The

financial reporting purposes, since the

facts are the same as in Example 7,

Examples

corporation accumulates information for

except that the corporation incurred the

the tax return about the projects at the

Example 6. Multiple year

expenditure and recorded the reserve

project level and expects the IRS to

positions. A corporation incurs an

in 2009. The corporation has taken a

address the issues during an

expenditure in 2010 and claims the

tax position in each of the 5 tax years

examination of each project separately.

entire amount as a deduction on its

(2009 through 2013) because on each

Corporation B determines that the

2010 return. During the course of

year’s tax return there would be an

appropriate unit of account for GAAP

reviewing its tax positions for purposes

adjustment to a line item on that return

financial reporting purposes is the

of establishing reserves for U.S. federal

if the position taken in that year is not

functional expenditures, based on the

income taxes for its 2010 audited

sustained. However, the corporation

amount of its expenditures, the

financial statements, the corporation

should not report the tax position taken

anticipated credits to be claimed, its

determines it is uncertain whether the

in the 2009 tax year because it was

previous experience, and the advice of

expenditure should instead be

taken in a tax year beginning before

its tax advisors. Based on the unit of

amortized over 5 years and records a

January 1, 2010. The tax position taken

account used for financial reporting

reserve with respect to the position

in each of the 2010 to 2013 tax years

purposes, Corporation A must use each

taken in 2010. The corporation did not

must be reported on Part I of the

project as its unit of account for

record a reserve for any of the positions

Schedule UTP filed with the tax return

Schedule UTP reporting, and

taken in tax years 2011 through 2014.

for the respective tax year in which the

Corporation B must use functional

The corporation has taken a tax

position was taken.

expenditures as its unit of account for

position in each of the 5 tax years

Example 9. Creation and use of

Schedule UTP reporting, regarding the

because, on each year’s tax return,

net operating loss (NOL). A

research and development credit.

there would be an adjustment to a line

corporation incurs a $50 expenditure in

item on that return if the position taken

Ranking Tax Positions by

2010 and claims the entire amount as a

in that year’s return is not sustained.

deduction on its 2010 tax return. The

Size

The tax position taken in the 2010 tax

deduction increases the corporation’s

year must be reported on Part I of

The corporation must rank by size each

NOL carryforward from $100 to $150.

Schedule UTP filed with the 2010 tax

tax position listed in Part I. The size of

The corporation uses the entire $150

return. None of the 2011 to 2014 tax

a tax position, however, need not be

NOL carryforward on its 2011 tax

positions must be reported on Schedule

reported anywhere on Schedule UTP.

return. Claiming the $50 deduction in

UTP because the corporation did not

See the instructions for Part I, column

2010 is a tax position taken in the 2010

record a reserve with respect to any of

(f), regarding coding to be used to rank

tax year because the position would

those tax positions.

the corporation’s tax positions.

result in an adjustment to a line item on

Size. The size of each tax position is

Example 7. Multiple year

the 2010 tax return if the position is not

determined on an annual basis and is

positions. A corporation incurs an

sustained. The deduction in 2011 of the

the amount of U.S. federal income tax

expenditure in 2010 and takes the

NOL carried forward from 2010 is a tax

reserve recorded for that position. If a

position that the expenditure may be

position taken on the 2011 tax return,

reserve is recorded for multiple tax

amortized over 5 years beginning on its

because the position would result in an

positions, then a reasonable allocation

2010 tax return. During the course of

adjustment to a line item on the 2011

of that reserve among the tax positions

reviewing its tax positions for purposes

tax return if the position is not

to which it relates must be made in

of establishing reserves for U.S. federal

sustained. The corporation did not

determining the size of each tax

income taxes for its 2010 audited

record a reserve with respect to its

position.

financial statements, the corporation

2010 tax position, but did record a

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Instructions For Schedule Utp - Uncertain Tax Position Statement - Internal Revenue Service - 2010 Page 3

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