Example 4: section 1.6694-2(b)(4)

Example 4 deals with the relevancy of the authorities described in section 1.6662-4(d)(3)(ii). The "more likely than not" standard is satisified if the return preparer relies on a U.S. Court of Appeals in another state if Appeal Court of the taxpayer does not have a position, even where the Appeal Courts in the other states are split with different optinions. The example stipulates that the decision relied upon is "well-reasoned." Does that mean that the IRS will make a determination aht an Appeal Court decision is not "well-reasoned?" Obviously not. I would conclude that the term "well-reasoned" is extraneous the the point of the example that the relevancy provisions of section 1.662-4(d)(3)(ii) will be followed.

Example 4 takes for granted that the return preparer has the talent and resources to research the law in the various Appeal Courts to support an undisclosed position. How with that research be saved and stored? Obviously, the IRS anticipates that the return preparer also has the talent to write and analyze the differences in the opinions in the various Courts of Appeals and understand the nuances or differences in the decisions.

There is insufficient time to do this research and analysis when the 2008 returns are being prepared for filing. The analysis of the positions taken should be done currently as the postions (to be undisclosed) are identified.


Section 1.6694-2(d)(5) the temporary regulations provides that the "resonable cause and good faith" exception to the section 6694 penalty takes into account reliance by the return preparer on advice and information supplied by a tax attorney.