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2. Permit taxpayers to report the actual amount of financial statement reserves in lieu of making other disclosures and completing the form. This approach may be preferable for taxpayers with limited reserves, subject to reporting only one specific issue, or having limited resources to complete the schedule.

Announcement 2010-9 states:

In addition to those positions for which a tax reserve must be established under FIN 48 or other accounting standards, uncertain tax positions will include any position related to the determination of any United States federal income tax liability for which a taxpayer or a related entity has not recorded a tax reserve because (i) the taxpayer expects to litigate the position, or (ii) the taxpayer has determined that the Service has a general administrative practice not to examine the position. For this purpose, a related entity is any entity that is related to the taxpayer under sections 267(b), 318(a), or 707(b).

The draft UTP instructions clarify that a corporation related to another corporation because of the application of section 267(b)(3), should not be required to report the other corporation’s uncertain tax position, unless the corporations are part of an affiliated group of corporations as defined within section 1504 and are included in a single consolidated tax return. In that case, a single Schedule UTP should be filed as clarified in Announcement 2010-30.

Announcement 2010-17 subsequently requested comments on “how uncertain tax positions should be reported in various related entity contexts, such as how members of a consolidated group for financial statement or tax return purposes or entities that are disregarded for federal tax purposes should report uncertain tax positions?”

As mentioned above, in the case of a consolidated return, the parent corporation should report all uncertain tax positions of the group, including positions related to intercompany transactions. If an uncertain tax position relates to activity of a subsidiary before entering the consolidated tax return, the parent should include this position in the consolidated group report if the position could affect the federal tax liability of the consolidated group. If a subsidiary ceases to be a member of the consolidated group, an uncertain tax position of the subsidiary should be reported by the parent even after the subsidiary ceases to be a member of the group if the position could affect the federal tax liability of the group.

Pass-through Entities. Where a corporation owns a direct interest in a partnership meeting the requirements of section 707(b), the corporation will already have identified and reported the UTP on its financial statements whether or not it is included in a consolidated financial statement. Schedule UTP contemplates the inclusion of these UTPs (See Column D of Parts I and II of Schedule UTP). If a partnership is indirectly related to a corporation as defined by section 707(b), any UTP of the partnership should only be reported on Schedule UTP if it is included in a financial statement that includes both the corporation and partnership. If a partnership’s UTP is included on a financial statement that includes the corporation, the corporate partner should


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