Instructions for Form 8275-R

Instructions for Form 8275-R

Department of the Treasury

Internal Revenue Service

(Rev. November 2024)

Regulation Disclosure Statement

Section references are to the Internal Revenue Code

unless otherwise noted.

represents a good-faith challenge to the validity of the

regulation and has a reasonable basis.

Future Developments

Instead of Form 8275-R, use Form 8275, Disclosure

Statement, for the disclosure of items or positions which

are not contrary to regulations but which are not otherwise

adequately disclosed.

General Instructions

Form 8275-R is filed by individuals, corporations,

pass-through entities, and tax return preparers.

Purpose of Form

For items attributable to a pass-through entity,

disclosure should be made on the tax return of the entity. If

the entity doesn’t make the disclosure, the partner (or

shareholder, etc.) can make adequate disclosure of these

items.

For the latest information about developments related to

Form 8275-R and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form8275R.

Form 8275-R is used by taxpayers and tax return

preparers to disclose positions taken on a tax return that

are contrary to Treasury regulations. The form is filed to

avoid the portions of the accuracy-related penalty due to

disregard of regulations or to a substantial

understatement of income tax for non-tax shelter items if

the return position has a reasonable basis. It can also be

used for disclosures relating to the economic substance

penalty and the preparer penalties for tax

understatements due to positions taken contrary to

regulations.

The portion of the accuracy-related penalty

attributable to the following types of misconduct

CAUTION cannot be avoided by disclosure on Form 8275-R.

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• Negligence.

• Disregard of rules (other than regulations).

• Any substantial understatement of income tax on a tax

shelter item.

• Any substantial or gross valuation misstatement

(including misstatements attributable to non-arm's length

prices) under chapter 1.

• Any substantial overstatement of pension liabilities.

• Any substantial estate or gift tax valuation

understatements.

• Any claim of tax benefits from a transaction lacking

economic substance (within the meaning of section

7701(o)) or failing to meet the requirements of any similar

rule of law.

• Any otherwise undisclosed foreign financial asset

understatement.

• Any inconsistent estate basis.

• Any overstatement of the deduction provided in section

170(p).

• Any disallowance of a deduction because of section

170(h)(7).

Because of the importance to the self-assessment

system of disclosing positions contrary to regulations, the

requirements for making such disclosures are stringent.

• The disclosure is adequate only if it is made separately

on a Form 8275-R.

• The penalty for reckless or intentional disregard of a

regulation can be avoided by disclosure only if the position

Oct 7, 2024

Who Should File

How To File

When a return position is contrary to regulations, you must

file Form 8275-R. File all Forms 8275-R with your original

tax return. Keep a copy for your records. You may also be

able to file Forms 8275-R with an amended return. See

Regulations sections 1.6662-4(f)(1) and 1.6664-2(c)(3) for

more information.

To adequately disclose items reported by a

pass-through entity, you must complete and file a separate

Form 8275-R for items reported by each entity.

To adequately disclose a position or positions related to

more than one foreign entity, you must complete and file a

separate Form 8275-R for each foreign entity.

Carryovers, carrybacks, and recurring items.

Carryover items must be disclosed in the tax year in which

they originated. You don’t have to file another Form

8275-R for those items for the tax years in which the

carryover is taken into account.

Carryback items must be disclosed for the tax year in

which they originated. You don’t have to file another Form

8275-R for those items for the tax years in which the

carryback is taken into account.

However, if you disclose items that are of a recurring

nature (such as depreciation expense), you must file Form

8275-R for each tax year in which the item occurs.

If you are disclosing a position that is contrary to a

regulation, and the position relates to a reportable

transaction, as defined in Regulations section

1.6011-4(b), you must also make the disclosure, as

indicated in Regulations section 1.6011-4(d). See Form

8886, Reportable Transaction Disclosure Statement, and

its instructions; Notice 2006-6, 2006-5 I.R.B. 385,

available at IRS.gov/irb/2006-05_IRB/ar10.html; and

Notice 2010-62, 2010-40 I.R.B. 411, available at

IRS.gov/irb/2010-40_IRB/ar09.html.

Cat. No. 14317I

Accuracy-Related Penalty

Generally, the accuracy-related penalty is 20% of any

portion of a tax underpayment attributable to:

1. Negligence or disregard of rules or regulations;

2. Any substantial understatement of income tax;

3. Any substantial valuation misstatement under

chapter 1 of the Internal Revenue Code;

4. Any substantial overstatement of pension liabilities;

5. Any substantial estate or gift tax valuation

understatement;

6. Any claim of tax benefits from a transaction lacking

economic substance, as defined by section 7701(o), or

failing to meet the requirements of any similar rule of law.

7. Any undisclosed foreign financial asset

understatement;

8. Any inconsistent estate basis;

9. Any overstatement of the deduction provided in

section 170(p); or

10. Any disallowance of a deduction because of section

170(h)(7).

If you failed to keep proper books and records or failed

to properly substantiate items, you cannot avoid the

penalty by disclosure.

Adequate disclosure. Generally, you can avoid the

disregard of regulations and substantial understatement

portions of the accuracy-related penalty if the position is

adequately disclosed and the position has at least a

reasonable basis. To avoid the disregard of regulations

portion of the accuracy-related penalty, the position taken

must also represent a good-faith challenge to the validity

of the regulation. See Regulations section 1.6662-3(c)(1).

Reasonable basis. Reasonable basis is a relatively

high standard of tax reporting that is significantly higher

than not frivolous or not patently improper. The

reasonable basis standard isn’t satisfied by a return

position that is merely arguable.

If the return position is reasonably based on one of the

authorities set forth in Regulations section 1.6662-4(d)(3)

(iii) (taking into account the relevance and persuasiveness

of the authorities, and subsequent developments), the

return position will generally satisfy the reasonable basis

standard even though it may not satisfy the substantial

authority standard, as defined in Regulations section

1.6662-4(d)(2). For details, see Regulations sections

1.6662-4(d) and 1.6662-3(b)(3).

If you failed to keep proper books and records or failed

to properly substantiate the items, you cannot avoid the

penalty by disclosure.

The penalty is 40% of any portion of a tax

underpayment attributable to one or more gross valuation

misstatements in (3), (4), (5), or (10) above if the

applicable dollar limitation under section 6662(h)(2) is

met. The penalty also increases to 40% for failing to

adequately disclose a transaction that lacks economic

substance in (6) above. See Economic substance, below.

The penalty is 40% of any portion of an underpayment

that is attributable to any undisclosed foreign financial

asset understatement in (7) above. The penalty is 50% of

any portion of an underpayment attributable to one or

more overstatements of the deduction provided in section

170(p) in (9) above.

Substantial Understatement

Economic substance. To satisfy the disclosure

requirements under section 6662(i), you may adequately

disclose with a timely filed original return (determined with

regard to extensions) or a qualified amended return (as

defined under Regulations section 1.6664-2(c)(3)) the

relevant facts affecting the tax treatment of the

transaction.

There is a substantial understatement of income tax if

the amount of the understatement for any year exceeds

the greater of:

1. 10% of the tax required to be shown on the return

for the tax year, or

2. $5,000.

Note. If you filed a Schedule UTP (Form 1120), Uncertain

Tax Position Statement, you may not need to file Form

8275-R to satisfy the disclosure requirements of section

6662(i). For more information, see the Instructions for

Schedule UTP (Form 1120), Uncertain Tax Position

Statement.

Reasonable cause exception. Generally, no

accuracy-related penalty will be imposed on any portion of

an underpayment if you show that there was reasonable

cause for that portion and that you acted in good faith with

respect to that portion.

The reasonable cause and good faith exception

doesn’t apply to any portion of an underpayment

CAUTION attributable to a transaction that lacks economic

substance under section 7701(o).

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An understatement is the excess of:

1. The amount of tax required to be shown on the

return for the tax year, over

2. The amount of tax imposed which is shown on the

return for the tax year, reduced by any rebates.

An understatement of a corporation (other than an S

corporation or a personal holding company, as defined in

section 542) is substantial if it exceeds in any year the

lesser of:

1. 10% of the tax required to be shown on the return

for the tax year (or, if greater, $10,000), or

2. $10 million.

Reduction of understatement. The amount of the

understatement will be reduced by the part that is

attributable to the following items.

• An item (other than a tax shelter item) for which there

was substantial authority for the treatment claimed at the

time the return was filed or on the last day of the tax year

to which the return relates.

• An item (other than a tax shelter item) that is adequately

disclosed on this form if there is a reasonable basis for the

tax treatment of the item. (In no event will a corporation be

treated as having a reasonable basis for its tax treatment

of an item attributable to a multi-party financing

transaction entered into after August 5, 1997, if the

treatment doesn’t clearly reflect the income of the

corporation.

For corporate tax shelter transactions (and for tax

shelter items of other taxpayers for tax years ending after

October 22, 2004), the only exception to the substantial

understatement portion of the accuracy-related penalty is

the reasonable cause exception. For more details, see

Reasonable cause exception, earlier; section 6662(d);

and Regulations section 1.6664-4.

Tax shelter items. A tax shelter, for purposes of the

substantial understatement portion of the

accuracy-related penalty, is a partnership or other entity,

plan, or arrangement, with a significant purpose to avoid

or evade federal income tax. For transactions on or before

August 5, 1997, a tax shelter is a partnership or other

entity, plan, or arrangement, whose principal purpose is to

avoid or evade federal income tax.

A tax shelter item is any item of income, gain, loss,

deduction, or credit that is directly or indirectly attributable

to the principal or significant purpose of the tax shelter to

avoid or evade federal income tax.

Tax Return Preparer Penalties

A preparer who files a return or claim for refund is subject

to a penalty in an amount equal to the greater of $1,000 or

50% of the income derived (or to be derived) by the tax

return preparer, with respect to the return or claim, for

taking a position which the preparer knew or reasonably

should have known would understate any part of the

liability if:

• There is or was no substantial authority for the position;

• The position is a tax shelter (as defined in section

6662(d)(2)(C)(ii)) or a reportable transaction to which

section 6662A applies and it wasn’t reasonable to believe

that the position would more likely than not be sustained

on its merits; or

• The position disclosed, as provided in section 6662(d)

(2)(B)(ii), isn’t a tax shelter or a reportable transaction to

which section 6662A applies, and there was no

reasonable basis for the position.

The penalty won’t apply if it can be shown that there

was reasonable cause for the understatement and that the

preparer acted in good faith.

In cases where any part of the understatement of the

liability is due to a willful attempt by the return preparer to

understate the liability, or if the understatement is due to

reckless or intentional disregard of rules or regulations by

the preparer, the preparer is subject to a penalty equal to

the greater of $5,000 or 75% of the income derived (or to

be derived) by the tax return preparer with respect to the

return or claim. This penalty shall be reduced by the

amount of the penalty paid by such person for taking an

unreasonable position, or a position with no reasonable

basis, as described immediately above.

A preparer isn’t considered to have recklessly or

intentionally disregarded a rule if a position is adequately

disclosed and has a reasonable basis.

Note. For more information about the accuracy-related

penalty and preparer penalties, and the means of avoiding

these penalties, see the regulations under sections 6662,

6664, and 6694.

Specific Instructions

Be sure to provide all of the information requested in Parts

I, II, and III (if applicable). Your disclosure will be

considered adequate if you file Form 8275-R and provide

the required information in detail.

Use Part IV on page 2 if you need more space for Parts

I and/or II. Include the corresponding part and line number

from page 1. You can use a continuation sheet(s) if you

need additional space. Be sure to put your name and

identifying number on each sheet.

Reference ID number. If you are filing Form 8275-R to

disclose a position related to a foreign entity for which an

information return (such as Form 5471, Information Return

of U.S. Persons With Respect to Certain Foreign

Corporations) is filed, enter on Form 8275-R the same

reference ID number for the foreign entity that is entered

on the information return.

If you are filing Form 8275-R to report a position or

positions related to multiple foreign entities, file a separate

Form 8275-R for each foreign entity.

Part I

Column (a). Enter the full citation for each regulation for

which you have taken a contrary position. The citation

should specify the section number, including all

designations of smaller units (lettered or numbered

subsections, paragraphs, subparagraphs, and clauses) to

which the contrary position relates. For example, enter

“1.482-7(d)(1)(iii)” instead of “482 regs” or “1.482-7”.

Column (b). Identify the item by name.

If any item you disclose is from a pass-through entity,

you must identify the item as such. If you disclose items

from more than one pass-through entity, you must

complete a separate Form 8275-R for each entity. Also,

see How To File, earlier.

Column (c). Enter a complete description of the item(s)

you are disclosing.

Example. If you are reporting entertainment expenses

in column (b), then you must list the items for

entertainment expenses in column (c), such as “theater

tickets, catering expenses, and banquet hall rentals.”

If you claim the same tax treatment for a group of

similar items in the same tax year, enter a description

identifying the group of items you are disclosing rather

than a separate description of each item within the group.

Columns (d) through (f). Enter the location of the

item(s) by identifying the form number or schedule in

column (d), the line number in column (e), and the amount

of the item(s) in column (f).

Part II

Your disclosure must include the following.

1. A description of the relevant facts affecting the tax

treatment of the item. To satisfy this requirement, you must

include information that can reasonably be expected to

apprise the IRS of the identity of the item, its amount, and

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the nature of the controversy or potential controversy.

Information concerning the nature of the controversy can

include a description of the legal issues presented by the

facts.

2. A statement explaining why you believe this

regulation to be invalid.

Unless provided otherwise in the General

Instructions, earlier, your disclosure won’t be

CAUTION considered adequate unless (1) and (2) above are

provided using Form 8275-R. For example, your

disclosure won’t be considered adequate if you attach a

copy of an acquisition agreement to your tax return to

disclose the issues involved in determining the basis of

certain acquired assets. If Form 8275-R isn’t completed

and attached to the return, the disclosure won’t be

considered valid even if the information in (1) and (2)

above is provided using another method, such as a

different form or an attached letter.

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Part III

Line 4. Contact your pass-through entity if you don’t

know where its return was filed. However, for partners and

S corporation shareholders, information for line 4 can be

found on the Schedule K-1 that you received from the

partnership or S corporation.

If the pass-through entity filed its return electronically

using e-file, enter “e-file” on line 4.

Paperwork Reduction Act Notice. We ask for the

information on this form to carry out the Internal Revenue

laws of the United States. You are required to give us the

information if you wish to use this form to make adequate

disclosure to avoid the portion of the accuracy-related

penalty due to a substantial understatement of income tax

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or disregard of regulations, or to avoid certain preparer

penalties. We need it to ensure that you are complying

with these laws and to allow us to figure and collect the

right amount of tax.

You are not required to provide the information

requested on a form that is subject to the Paperwork

Reduction Act unless the form displays a valid OMB

control number. Books or records relating to a form or its

instructions must be retained as long as their contents

may become material in the administration of any Internal

Revenue law. Generally, tax returns and return information

are confidential, as required by section 6103.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

burden for individual taxpayers filing this form is approved

under OMB control number 1545-0074 and is included in

the estimates shown in the instructions for their individual

income tax return. The estimated burden for all other

taxpayers who file this form is shown below.

Recordkeeping . . . . . . . . . . . . . . . . .

Learning about the law or the

form . . . . . . . . . . . . . . . . . . . . . . .

Preparing and sending the form to

the IRS . . . . . . . . . . . . . . . . . . . . .

3 hr., 35 min.

53 min.

59 min.

If you have comments concerning the accuracy of

these time estimates or suggestions for making this form

simpler, we would be happy to hear from you. See the

instructions for the tax return with which this form is filed.