Definition of Underpayment

1
ID:
Office:
UILC:
CCA_2008100616421664
---
6664.01-00
Number: 200851062
Release Date: 7/21/2009
From: ---
Sent: Monday, October 06, 2008 4:42:19 PM
To: ---
Cc:
Subject: RE: Penalty Question
I agree with all that's stated as far as it goes. In addition, if the taxpayer is actually agreeing to adjustments to be made in accordance with a document treated as a qualified amended return under procedures under RP 94-69, there could not be accuracy-related penalties based on the amount of those adjustments.
I hope that I said that clearly enough.
From: ---
Sent: Monday, October 06, 2008 3:27 PM
To: ---
Cc: ---
Subject: RE: Penalty Question
---
I already spoke with ---about this. Simply disclosing transactions under Rev. Proc. 94-69 does not get a taxpayer out of negligence or substantial understatement penalties automatically. What Rev.
Proc. 94-69 does is simply treat a particular type of written statement, given at the beginning of the audit, as if it were a qualified amended return. So if the entire issue of whether either penalty applied was based on adequate disclosure, a statement under Rev. Proc. 94-69 could be treated the same as if a Form 8275 was attached to the tax return.
However, even with adequate disclosure, a penalty can be imposed "in the case of a position that does not have a reasonable basis or where the taxpayer fails to keep adequate books and records or to substantiate items properly." Treas. Reg. 1.6662-3(c)(1). Also, the "adequate disclosure" exception to the substantial understatement penalty does not apply to tax shelter items. Treas. Reg. 1.6662-4(g)(1)(iii).
---, please let us know if I have written anything above you disagree with.
Thanks,
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