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                                                                                          Department of the Treasury
                                                                                          Internal Revenue Service
Instructions for

Form 8275-R

(Rev. January 2021)

(For use with Form 8275-R (Rev. August 2013))
Regulation Disclosure Statement

Section references are to the Internal   substance (within the meaning of        To make adequate disclosure for 
Revenue Code unless otherwise noted.     section 7701(o)) or failing to meet the items reported by a pass-through 
                                         requirements of any similar rule of     entity, you must complete and file a 
Future Developments                      law.                                    separate Form 8275-R for items 
For the latest information about         • Any otherwise undisclosed foreign     reported by each entity.
developments related to Form 8275-R      financial asset understatement.
and its instructions, such as                                                    To make adequate disclosure for a 
legislation enacted after they were        Because of the importance to the      position or positions related to more 
published, go to IRS.gov/Form8275R.      self-assessment system of disclosing    than one foreign entity, you must 
                                         positions contrary to regulations, the  complete and file a separate Form 
General Instructions                     requirements for making such            8275-R for each foreign entity.
                                         disclosures are stringent.              Carryovers, carrybacks, and recur-
Purpose of Form                          • The disclosure is adequate only if it ring items.  Carryover items must be 
Form 8275-R is used by taxpayers         is made separately on a Form            disclosed in the tax year in which they 
and tax return preparers to disclose     8275-R.                                 originated. You do not have to file 
positions taken on a tax return that are • The penalty for reckless or           another Form 8275-R for those items 
contrary to Treasury regulations. The    intentional disregard of a regulation   for the tax years in which the 
form is filed to avoid the portions of   can be avoided by disclosure only if    carryover is taken into account.
the accuracy-related penalty due to      the position represents a good-faith    Carryback items must be disclosed 
disregard of regulations or to a         challenge to the validity of the        for the tax year in which they 
substantial understatement of income     regulation and has a reasonable         originated. You do not have to file 
tax for non-tax shelter items if the     basis.                                  another Form 8275-R for those items 
return position has a reasonable           Instead of Form 8275-R, use Form      for the tax years in which the 
basis. It can also be used for           8275, Disclosure Statement, for the     carryback is taken into account.
disclosures relating to the economic     disclosure of items or positions which  However, if you disclose items that 
substance penalty and the preparer       are not contrary to regulations but     are of a recurring nature (such as 
penalties for tax understatements due    which are not otherwise adequately      depreciation expense), you must file 
to positions taken contrary to           disclosed.                              Form 8275-R for each tax year in 
regulations.                                                                     which the item occurs.
        The portion of the               Who Should File                         If you are disclosing a position that 
  !     accuracy-related penalty         Form 8275-R is filed by individuals,    is contrary to a regulation, and the 
CAUTION attributable to the following    corporations, pass-through entities,    position relates to a reportable 
types of misconduct cannot be            and tax return preparers.               transaction as defined in Regulations 
avoided by disclosure on Form                                                    section 1.6011-4(b), you must also 
                                           For items attributable to a 
8275-R.                                                                          make the disclosure as indicated in 
                                         pass-through entity, disclosure should 
                                         be made on the tax return of the        Regulations section 1.6011-4(d). See 
• Negligence.                                                                    Form 8886, Reportable Transaction 
                                         entity. If the entity does not make the 
• Disregard of rules.                                                            Disclosure Statement, and its 
                                         disclosure, the partner (or 
• Any substantial understatement of                                              instructions; Notice 2006-6, 2006-5 
                                         shareholder, etc.) can make adequate 
income tax on a tax shelter item.                                                I.R.B. 385, available at IRS.gov/irb/
                                         disclosure of these items.
• Any substantial or gross valuation                                             2006-05_IRB/ar10.html; and Notice 
misstatement (including                                                          2010-62, 2010-40 I.R.B. 411, 
misstatements attributable to            How To File
non-arm's length prices) under           When a return position is contrary to   available at IRS.gov/irb/2010-40_IRB/
chapter 1.                               regulations, you must file Form         ar09.html.
• Any substantial overstatement of       8275-R. File all Forms 8275-R with 
pension liabilities.                     your original tax return. Keep a copy   Accuracy-Related Penalty
• Any substantial estate or gift tax     for your records. You may also be       Generally, the accuracy-related 
valuation understatements.               able to file Forms 8275-R with an       penalty is 20% of any portion of a tax 
• Any claim of tax benefits from a       amended return. See Regulations         underpayment attributable to:
transaction lacking economic             sections 1.6662-4(f)(1) and             1. Negligence or disregard of rules 
                                         1.6664-2(c)(3) for more information.    or regulations;

Oct 06, 2020                                        Cat. No. 14317I

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2. Any substantial understatement            If you failed to keep proper books        An understatement of a corporation 
of income tax;                            and records or failed to substantiate      (other than an S corporation or a 
3. Any substantial valuation              items properly, you cannot avoid the       personal holding company, as defined 
misstatement under chapter 1 of the       penalty by disclosure.                     in section 542) is substantial if it 
                                                                                     exceeds in any year the lesser of:
Internal Revenue Code;                    Adequate disclosure.    Generally, 
4. Any substantial overstatement          you can avoid the disregard of               1. 10% of the tax required to be 
of pension liabilities;                   regulations and substantial                shown on the return for the tax year 
5. Any substantial estate or gift tax     understatement portions of the             (or, if greater, $10,000), or
valuation understatement; or              accuracy-related penalty if the              2. $10,000,000.
                                          position is adequately disclosed and 
6. Any claim of tax benefits from a       the position has at least a reasonable     Reduction of understatement.          The 
transaction lacking economic              basis. To avoid the disregard of           amount of the understatement will be 
substance, as defined by section          regulations portion of the                 reduced by the part that is attributable 
7701(o), or failing to meet the           accuracy-related penalty, the position     to the following items.
requirements of any similar rule of       taken must also represent a                • An item (other than a tax shelter 
law.                                      good-faith challenge to the validity of    item) for which there was substantial 
The penalty is 40% of any portion         the regulation. See Regulations            authority for the treatment claimed at 
of a tax underpayment attributable to     section 1.6662-3(c)(1).                    the time the return was filed or on the 
                                                                                     last day of the tax year to which the 
one or more gross valuation                  Reasonable basis.    Reasonable         return relates.
misstatements in (3), (4), or (5) above   basis is a relatively high standard of     • An item (other than a tax shelter 
if the applicable dollar limitation under tax reporting that is significantly higher item) that is adequately disclosed on 
section 6662(h)(2) is met. The penalty    than not frivolous or not patently         this form if there is a reasonable basis 
also increases to 40% for failing to      improper. The reasonable basis             for the tax treatment of the item. (In no 
adequately disclose a transaction that    standard is not satisfied by a return      event will a corporation be treated as 
lacks economic substance in (6)           position that is merely arguable.          having a reasonable basis for its tax 
above. See Economic substance, 
below. The penalty is 40% of any             If the return position is reasonably    treatment of an item attributable to a 
portion of an underpayment that is        based on one of the authorities set        multi-party financing transaction 
attributable to any undisclosed foreign   forth in Regulations section               entered into after August 5, 1997, if 
financial asset understatement.           1.6662-4(d)(3)(iii) (taking into account   the treatment does not clearly reflect 
                                          the relevance and persuasiveness of        the income of the corporation.
Economic substance.     To satisfy the    the authorities, and subsequent              For corporate tax shelter 
disclosure requirements under section     developments), the return position will    transactions (and for tax shelter items 
6662(i), you may adequately disclose      generally satisfy the reasonable basis     of other taxpayers for tax years 
with a timely filed original return       standard even though it may not            ending after October 22, 2004), the 
(determined with regard to                satisfy the substantial authority          only exception to the substantial 
extensions) or a qualified amended        standard as defined in Regulations         understatement portion of the 
return (as defined under Regulations      section 1.6662-4(d)(2). For details,       accuracy-related penalty is the 
section 1.6664-2(c)(3)) the relevant      see Regulations sections 1.6662-4(d);      reasonable cause exception. For 
facts affecting the tax treatment of the  1.662-3(b)(3).                             more details, see Reasonable cause 
transaction.
                                             If you failed to keep proper books      exception, earlier; section 6662(d); 
Note. If you filed a Schedule UTP         and records or failed to substantiate      and Regulations section 1.6664-4.
(Form 1120), you may not need to file     items properly, you cannot avoid the 
Form 8275-R to satisfy the disclosure     penalty by disclosure.                       Tax shelter items.   A tax shelter, 
                                                                                     for purposes of the substantial 
requirements of section 6662(i). See      Substantial Understatement                 understatement portion of the 
the Instructions for Schedule UTP                                                    accuracy-related penalty, is a 
                                          An understatement is the excess of:
(Form 1120).                                                                         partnership or other entity, plan, or 
                                             1. The amount of tax required to 
Reasonable cause exception.               be shown on the return for the tax         arrangement, with a significant 
Generally, no accuracy-related            year, over                                 purpose to avoid or evade federal 
penalty will be imposed on any portion                                               income tax. For transactions on or 
                                             2. The amount of tax shown on the 
of an underpayment if you show that                                                  before August 5, 1997, a tax shelter is 
                                          return for the tax year, reduced by any 
there was reasonable cause for that                                                  a partnership or other entity, plan, or 
                                          rebates.
portion and that you acted in good                                                   arrangement, whose principal 
faith with respect to that portion.          There is a substantial                  purpose is to avoid or evade federal 
        The reasonable cause and          understatement of income tax if the        income tax.
                                          amount of the understatement for any         A tax shelter item is any item of 
!       good faith exception does not     year exceeds the greater of:               income, gain, loss, deduction, or 
CAUTION apply to any portion of an 
underpayment attributable to a               1. 10% of the tax required to be        credit that is directly or indirectly 
transaction that lacks economic           shown on the return for the tax year,      attributable to the principal or 
substance under section 7701(o).          or                                         significant purpose of the tax shelter 
                                                                                     to avoid or evade federal income tax.
                                             2. $5,000.

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Tax Return Preparer Penalties                                                        If you claim the same tax treatment 
A preparer who files a return or claim    Specific Instructions                      for a group of similar items in the 
for refund is subject to a penalty in an  Be sure to supply all of the information   same tax year, enter a description 
amount equal to the greater of $1,000     requested in Parts I and II and, if        identifying the group of items you are 
or 50% of the income derived (or to be    applicable, Part III. Your disclosure      disclosing rather than a separate 
derived) by the tax return preparer,      will be considered adequate if you file    description of each item within the 
with respect to the return or claim, for  Form 8275-R and supply the                 group.
taking a position which the preparer      information requested in detail.           Columns (d) through (f). Enter the 
knew or reasonably should have                                                       location of the item(s) by identifying 
known would understate any part of        Use Part IV on page 2 if you need 
                                                                                     the form number or schedule and the 
the liability if:                         more space for Part I or II. Indicate the 
                                                                                     line number in columns (d) and (e) 
• There is or was no substantial          corresponding part and line number 
                                                                                     and the amount of the item(s) in 
authority for the position;               from page 1. You can use a 
                                                                                     column (f).
• The position is a tax shelter (as       continuation sheet(s) if you need 
defined in section 6662(d)(2)(C)(ii)) or  additional space. Be sure to put your 
a reportable transaction to which         name and identifying number on each        Part II
section 6662A applies and it was not      sheet.                                     Your disclosure must include the 
                                                                                     following.
reasonable to believe that the position   Reference ID number.     If you are 
                                                                                     1. A description of the relevant 
would more likely than not be             filing Form 8275-R to disclose a 
                                                                                     facts affecting the tax treatment of the 
sustained on its merits; or               position related to a foreign entity for 
                                                                                     item. To satisfy this requirement, you 
• The position disclosed as provided      which an information return (such as 
                                                                                     must include information that can 
in section 6662(d)(2)(B)(ii) is not a tax Form 5471) is filed, enter on Form 
                                                                                     reasonably be expected to apprise the 
shelter or a reportable transaction to    8275-R the same reference ID 
                                                                                     IRS of the identity of the item, its 
which section 6662A applies, and          number for the foreign entity that is 
                                                                                     amount, and the nature of the 
there was no reasonable basis for the     entered on the information return.
                                                                                     controversy or potential controversy. 
position.                                 If you are filing Form 8275-R to           Information concerning the nature of 
                                          report a position or positions related to 
  The penalty will not apply if it can                                               the controversy can include a 
                                          multiple foreign entities, file a 
be shown that there was reasonable                                                   description of the legal issues 
                                          separate Form 8275-R for each 
cause for the understatement and that                                                presented by the facts.
                                          foreign entity.
the preparer acted in good faith.                                                    2. A statement explaining why you 
                                                                                     believe this regulation to be invalid.
  In cases where any part of the          Part I
understatement of the liability is due                                                       Unless provided otherwise in 
                                          Column (a).    Enter the full citation for 
to a willful attempt by the return                                                   !       the General Instructions, 
                                          each regulation for which you have 
preparer to understate the liability, or                                             CAUTION earlier, your disclosure will not 
                                          taken a contrary position. The citation 
if the understatement is due to                                                      be considered adequate unless (1) 
                                          should specify the section number, 
reckless or intentional disregard of                                                 and (2) above are provided using 
                                          including all designations of smaller 
rules or regulations by the preparer,                                                Form 8275-R. For example, your 
                                          units (lettered or numbered 
the preparer is subject to a penalty                                                 disclosure will not be considered 
                                          subsections, paragraphs, 
equal to the greater of $5,000 or 75%                                                adequate if you attach a copy of an 
                                          subparagraphs, and clauses) to which 
of the income derived (or to be                                                      acquisition agreement to your tax 
                                          the contrary position relates. For 
derived) by the tax return preparer                                                  return to disclose the issues involved 
                                          example, enter “1.482-7(d)(1)(iii)” 
with respect to the return or claim.                                                 in determining the basis of certain 
                                          instead of “482 regs” or “1.482-7”.
This penalty shall be reduced by the                                                 acquired assets. If Form 8275-R is not 
amount of the penalty paid by such        Column (b).    Identify the item by        completed and attached to the return, 
person for taking an unreasonable         name.                                      the disclosure will not be considered 
position, or a position with no           If any item you disclose is from a         valid even if the information in (1) and 
reasonable basis, as described            pass-through entity, you must identify     (2) above is provided using another 
immediately above.                        the item as such. If you disclose items    method, such as a different form or an 
  A preparer is not considered to         from more than one pass-through            attached letter.
have recklessly or intentionally          entity, you must complete a separate 
disregarded a rule if a position is       Form 8275-R for each entity. Also,         Part III
adequately disclosed and has a            see How To File, earlier.
                                                                                     Line 4. Contact your pass-through 
reasonable basis.                         Column (c).    Enter a complete            entity if you do not know where its 
                                          description of the item(s) you are         return was filed. However, for partners 
Note. For more information about the      disclosing.                                and S corporation shareholders, 
accuracy-related penalty and preparer 
penalties, and the means of avoiding      Example.       If an entertainment         information for line 4 can be found on 
these penalties, see the regulations      expense was reported in column (b),        the Schedule K-1 that you received 
under sections 6662, 6664, and 6694.      then list in column (c) “theater tickets,  from the partnership or S corporation.
                                          catering expenses, and banquet hall 
                                          rentals.”

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If the pass-through entity filed its      is subject to the Paperwork Reduction   estimated burden for all other 
return electronically using e-file, enter Act unless the form displays a valid    taxpayers who file this form is shown 
“e-file” on line 4.                       OMB control number. Books or            below.
                                          records relating to a form or its 
Paperwork Reduction Act Notice.           instructions must be retained as long   Recordkeeping         3 hr., 35 min.
We ask for the information on this        as their contents may become            Learning about the 
form to carry out the Internal Revenue    material in the administration of any   law or the form                        53 min.
laws of the United States. You are        Internal Revenue law. Generally, tax 
required to give us the information if    returns and return information are      Preparing and sending 
you wish to use this form to make         confidential, as required by section    the form to the IRS .                  59 min.
adequate disclosure to avoid the          6103.
portion of the accuracy-related 
penalty due to a substantial              The time needed to complete and         If you have comments concerning 
understatement of income tax or           file this form will vary depending on   the accuracy of these time estimates 
disregard of regulations, or to avoid     individual circumstances. The           or suggestions for making this form 
certain preparer penalties. We need it    estimated burden for individual         simpler, we would be happy to hear 
to ensure that you are complying with     taxpayers filing this form is approved  from you. See the instructions for the 
these laws and to allow us to figure      under OMB control number                tax return with which this form is filed.
and collect the right amount of tax.      1545-0074 and is included in the 
                                          estimates shown in the instructions for 
You are not required to provide the       their individual income tax return. The 
information requested on a form that 

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