Concise Descriptions: During the Review of the Concise Descriptions disclosed on Schedule UTP filed with 2011 returns, the IRS identified problems with the quality of the content of some disclosures. Below are the instructions that were provided for 2011 returns. Instructions for preparing Concise Descriptions: “Provide a concise description of the tax position, including a description of the relevant facts affecting the tax treatment of the position and information that reasonably can be expected to apprise the IRS of the identity of the tax position and the nature of the issue. In most cases, the description should not exceed a few sentences. Stating that a concise description is “Available upon Request” is not an adequate description. “A concise description should not include an assessment of the hazards of a tax position or an analysis of the support for or against the tax position.” Concise Descriptions that do not clearly identify the taxpayer’s tax position and that do not provide sufficient relevant facts to apprise the IRS about the nature of the issue do not meet the requirements of the instructions. The following are hypothetical examples of the types of concise descriptions that do not meet the requirements set forth in the instructions for Schedule UTP: This issue is under audit for a prior year. This issue is one for which we have recorded a reserve because it was unresolved in prior years and is currently in Appeals. This is an issue for which we have recorded a reserve because the appropriate tax treatment of this position is unsettled and we are awaiting published guidance and we are awaiting the outcome of pending litigation. This is an issue that we know is subject to IRS scrutiny. This issue relates to how we have characterized certain expenditures and related deductions. These hypothetical concise descriptions do not provide relevant facts affecting the tax treatment of the item. In addition, these descriptions do not identify the tax position and the nature of the issue as provided for in the instructions for Schedule UTP. The table below shows examples of hypothetical concise descriptions that identify a tax issue, but do not provide relevant facts affecting the tax treatment of the item, and insufficiently describe the nature of the issue. Examples of concise descriptions for these issues that meet all the requirements of the instructions for Schedule UTP are also displayed in the table. Example Number Insufficient Concise Description Sufficient Concise Description 1 This is a research credit issue. The taxpayer incurred support department costs that were allocated to various research projects based upon a methodology the taxpayer considers reasonable. The issue is whether the taxpayer’s method of allocating these costs is acceptable by the IRS. 2 This is a transfer pricing issue. The taxpayer allocated management service costs between its domestic subsidiaries and a foreign subsidiary located in Country X using a methodology the taxpayer considers reasonable. The issue is whether the taxpayer’s method of allocating these costs is acceptable by the IRS. 3 The Taxpayer claimed a domestic production activities deduction. The domestic production activities deduction is highly factual and subject to review by the IRS. The Taxpayer claimed the domestic production activities deduction on certain production activities income for 2011. The issue is whether costs incurred for product aging processes that occur in designated areas located at the Taxpayer’s distribution facility are considered manufacturing or production costs of the tangible personal property, and therefore, a component of Qualified Production Activities Income. 4 The Taxpayer incurred costs during the year that are deductible as ordinary and necessary business expenses under IRC Sections 162 and that are included in "Other deductions" on Line 26 of Form 1120. The Taxpayer claimed a deduction for travel and entertainment expenses for conventions and sales meetings. The issues are whether adequate documentation has been retained to substantiate the deductions claimed and whether some of the expenses constitute entertainment subject to a 50% limitation.