SEC. 2. CHANGES FROM REV. PROC.

2004–73

.01 Editorial changes have been made in updating Rev. Proc. 2004–73.

.02 Section 1 clarifies that the disregard provisions, and not the negligence provision, of the section 6662 accuracy penalty are subject to an adequate disclosure exception (and that this revenue procedure is not applicable to the exception for the disregard provisions).

.03 Section 3.02 reflects the amendment of section 6662(d)(1)(B) by section 819 of the American Jobs Creation Act of 2004, Pub. L. No. 108–357, 118 Stat. 1418 (2004) (the AJCA of 2004) which revises the threshold for determining whether an understatement is substantial for certain corporations.

.04 Section 3.06 explains the effect of tax law changes effective after December 31, 2005, on the use of this revenue procedure for fiscal year and short year returns.

.05 Section 4.01 has been divided into paragraphs: 4.01, General, and 4.02, Items . The first paragraph provides general guidance relevant to all items in the revenue procedure, and the second paragraph identifies the items for which the entry of an amount on the line of a return is adequate disclosure.

.06 Section 4.01(3) adds a new paragraph cautioning that the entry of an amount on a line will not provide adequate disclosure when an understatement arises from a related party transaction.

.07 Section 4.01(4) adds an example (using Schedule M–3, Net Income (Loss) Reconciliation for Corporations With To- tal Assets of $10 Million or More ) for disclosing an item on a line that does not have a preprinted description identifying that item.

.08 Section 4.01(5) adds a new paragraph cautioning that the entry of an amount on a line in conformity with this revenue procedure will not provide adequate disclosure for the section 6662 accuracy-related penalty if the item or position is attributable to a tax shelter or if it does not have a reasonable basis and supporting records. The paragraph also includes limitations on the effectiveness of a disclosure for purposes of the section 6694 return preparer penalty. .09 Section 4.02(1)(d) reflects the enactment of section 170(f)(12) by section 884 of the AJCA of 2004. Section 170(f)(12) concerns the amount that a donor may deduct for a charitable contribution of a qualified vehicle, boat, or airplane having a value of more than $500.