Instructions For Schedule Utp Draft - Uncertain Tax Positions Statement

Column E. Administrative Practice

Refer to the instructions for Part I Column E.

Column F. Maximum Tax Adjustment

Refer to the instructions for Part I Column F.

Column G. Year of Tax Position

List the prior tax year in which the tax position was taken and the last month of that tax year, using a six-

digit number. For example, enter 201012 for tax years ending December 31, 2010, and 201108 for tax

years ending August 2011.

Specific Instructions for Part III

Part III Concise Description of Uncertain Tax Positions

When to Complete Part III

Part III must be completed for every tax position listed in either Part I or II. Enter the corresponding UTP

number from Part I or Part II related to the description.

Provide a concise description of the tax position, including information that reasonably can be expected to

apprise the IRS of the identity of the tax position and the nature of the uncertainty. The description must

include a statement that the position involves an item of income, gain, loss, deduction, or credit against

tax; a statement whether the position involves a determination of the value of any property or right or a

computation of basis; and the rationale for the position and the reasons for determining the position is

uncertain. In most cases, the description should not exceed a few sentences.

Examples of concise descriptions

Example 14. The corporation investigated and negotiated several potential business acquisitions during

the tax year. One of the transactions was completed during the tax year, but all other negotiations failed

and the other potential transactions were abandoned during the tax year. The corporation deducted costs

of investigating and partially negotiating potential business acquisitions that were not completed, and

capitalized costs allocable to one business acquisition that was completed. The issue is the allocation of

costs between failed acquisitions and the successful acquisition.

Example 15. The corporation entered into a loan transaction in which it made a general pledge of its

assets to its lender. The corporation’s assets include stock of FSub, a wholly-owned foreign subsidiary.

FSub reports no earnings and profits for U.S. federal income tax purposes based on its treatment of an

item of income that defers income recognition to a later year. The corporation has taken the position that

the pledge of FSub stock did not result in an investment in U.S. property under section 956. The issue is

whether there was an investment in U.S. property causing a deemed distribution of FSub earnings to the

corporation as a result of the treatment of an item of FSub’s income that defers its recognition.

Example 16. The corporation received a cash distribution from Venture LLC (Venture LLC is treated as a

U.S. partnership for tax purposes). The corporation claims the distribution is not taxable because it did

not exceed the corporation’s basis in its interest in Venture LLC. The issue concerns (1) the computation

of basis in the Venture LLC interest, and (2) the application of the disguised sale and partnership anti-

abuse rules of Subchapter K and regulations thereunder to recharacterize the transaction as other than a

distribution.

Instructions For Schedule Utp Draft - Uncertain Tax Positions Statement - 2010 Page 9