#### § 1.6662-0 Table of contents.

This section lists the captions that appear in §§ 1.6662-1 through 1.6662-7.

## § 1.6662-1 Overview of the accuracy-related penalty.

## § 1.6662-2 Accuracy-related penalty.

(a) In general.

(b) Amount of penalty.

(1) In general.

(2) Increase in penalty for gross valuation misstatement.

(c) No stacking of accuracy-related penalty components.

(d) Effective dates.

(1) Returns due before January 1, 1994.

(2) Returns due after December 31, 1993.

(3) Special rules for tax shelter items.

(4) Special rule for reasonable basis.

(5) Returns filed after December 31, 2002.

## § 1.6662-3 Negligence or disregard of rules or regulations.

(a) In general.

(b) Definitions and rules.

(1) Negligence.

(2) Disregard of rules or regulations.

(3) Reasonable basis.

(c) Exception for adequate disclosure.

(1) In general.

(2) Method of disclosure.

(d) Special rules in the case of carrybacks and carryovers.

(1) In general.

(2) Transition rule for carrybacks to pre-1990 years.

(3) Example.

## § 1.6662-4 Substantial understatement of income tax.

(a) In general.

(b) Definitions and computational rules.

(1) Substantial.

(2) Understatement.

(3) Amount of the tax required to be shown on the return.

(4) Amount of the tax imposed which is shown on the return.

(5) Rebate.

(6) Examples.

(c) Special rules in the case of carrybacks and carryovers.

(1) In general.

(2) Understatements for carryback years not reduced by amount of carrybacks.

(3) Tainted items defined.

(i) In general.

(ii) Tax shelter items.

(4) Transition rule for carrybacks to pre-1990 years.

(5) Examples.

(d) Substantial authority.

(1) Effect of having substantial authority.

(2) Substantial authority standard.

(3) Determination of whether substantial authority is present.

(i) Evaluation of authorities.

(ii) Nature of analysis.

(iii) Types of authority.

(iv) Special rules.

(A) Written determinations.

(B) Taxpayer's jurisdiction.

(C) When substantial authority determined.

(v) Substantial authority for tax returns due before January 1, 1990.

(e) Disclosure of certain information.

(1) Effect of adequate disclosure.

(2) Circumstances where disclosure will not have an effect.

(3) Restriction for corporations.

(f) Method of making adequate disclosure.

(1) Disclosure statement.

(2) Disclosure on return.

(3) Recurring item.

(4) Carrybacks and carryovers.

(5) Pass-through entities.

(g) Items relating to tax shelters.

(1) In general.

(i) Noncorporate taxpayers.

(ii) Corporate taxpayers.

(A) In general.

(B) Special rule for transactions occurring prior to December 9, 1994.

(iii) Disclosure irrelevant.

(iv) Cross-reference.

(2) Tax shelter.

(i) In general.

(ii) Principal purpose.

(3) Tax shelter item.

(4) Reasonable belief.

(i) In general.

(ii) Facts and circumstances; reliance on professional tax advisor.

(5) Pass-through entities.

## § 1.6662-5 Substantial and gross valuation misstatements under chapter 1.

(a) In general.

(b) Dollar limitation.

(c) Special rules in the case of carrybacks and carryovers.

(1) In general.

(2) Transition rule for carrybacks to pre-1990 years.

(d) Examples.

(e) Definitions.

(1) Substantial valuation misstatement.

(2) Gross valuation misstatement.

(3) Property.

(f) Multiple valuation misstatements on a return.

(1) Determination of whether valuation misstatements are substantial or gross.

(2) Application of dollar limitation.

(g) Property with a value or adjusted basis of zero.

(h) Pass-through entities.

(1) In general.

(2) Example.

(i) [Reserved]

(j) Transactions between persons described in section 482 and net section 482 transfer price adjustments. [Reserved]

(k) Returns affected.

## § 1.6662-5T Substantial and gross valuation misstatements under chapter 1 (temporary).

(a) through (e)(3) [Reserved]

(e)(4) Tests related to section 482.

(i) Substantial valuation misstatement.

(ii) Gross valuation misstatement.

(iii) Property.

(f) through (i) [Reserved]

(j) Transactions between persons described in section 482 and net section 482 transfer price adjustments.

## § 1.6662-6 Transactions between persons described in section 482 and net section 482 transfer price adjustments.

(a) In general.

(1) Purpose and scope.

(2) Reported results.

(3) Identical terms used in the section 482 regulations.

(b) The transactional penalty.

(1) Substantial valuation misstatement.

(2) Gross valuation misstatement.

(3) Reasonable cause and good faith.

(c) Net adjustment penalty.

(1) Net section 482 adjustment.

(2) Substantial valuation misstatement.

(3) Gross valuation misstatement.

(4) Setoff allocation rule.

(5) Gross receipts.

(6) Coordination with reasonable cause exception under section 6664(c).

(7) Examples.

(d) Amounts excluded from net section 482 adjustments.

(1) In general.

(2) Application of a specified section 482 method.

(i) In general.

(ii) Specified method requirement.

(iii) Documentation requirement.

(A) In general.

(B) Principal documents.

(C) Background documents.

(3) Application of an unspecified method.

(i) In general.

(ii) Unspecified method requirement.

(A) In general.

(B) Specified method potentially applicable.

(C) No specified method applicable.

(iii) Documentation requirement.

(A) In general.

(B) Principal and background documents.

(4) Certain foreign to foreign transactions.

(5) Special rule.

(6) Examples.

(e) Special rules in the case of carrybacks and carryovers.

(f) Rules for coordinating between the transactional penalty and the net adjustment penalty.

(1) Coordination of a net section 482 adjustment subject to the net adjustment penalty and a gross valuation misstatement subject to the transactional penalty.

(2) Coordination of net section 482 adjustment subject to the net adjustment penalty and substantial valuation misstatements subject to the transactional penalty.

(3) Examples.

(g) Effective date.

## § 1.6662-7 Omnibus Budget Reconciliation Act of 1993 changes to the accuracy-related penalty.

(a) Scope.

(b) No disclosure exception for negligence penalty.

(c) Disclosure standard for other penalties is reasonable basis.

(d) Reasonable basis.

[T.D. 8381, 56 FR 67497, Dec. 31, 1991; T.D. 8381, 57 FR 6165, Feb. 20, 1992, as amended by T.D. 8519, 59 FR 4794, Feb. 2, 1994; T.D. 8533, 59 FR 12548, Mar. 17, 1994; T.D. 8551, 59 FR 35031, July 8, 1994; T.D. 8617, 60 FR 45663, Sept. 1, 1995; T.D. 8656, 61 FR 4879, Feb. 9, 1996; T.D. 8656, 61 FR 14248, Apr. 1, 1996; T.D. 8790, 63 FR 66434, Dec. 2, 1998; T.D. 9109, 68 FR 75127, Dec. 30, 2003]