SECTION 1. PURPOSE

.01 This revenue procedure updates Rev. Proc. 2001–11 (2001–2 I.R.B. 275), and identifies circumstances under which the disclosure on a taxpayer’s return of a position with respect to an item is adequate for the purpose of reducing the understatement of income tax under § 6662(d) of the Internal Revenue Code (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the preparer penalty under § 6694(a) (relating to understatements due to unrealistic positions). This revenue procedure does not apply with respect to any other penalty provision (including the negligence or disregard provisions of the § 6662 accuracy-related penalty).

.02 This revenue procedure applies to any return filed on 2001 tax forms for a taxable year beginning in 2001, and to any return filed on 2001 tax forms in 2002 for short taxable years beginning in 2002.