Extract to table

However, an important distinction applies: under § 6662(h)(3), if the 40% rate applies, the contemporaneous documentation defense alone is insufficient — the taxpayer must independently establish reasonable cause and good faith to avoid the enhanced penalty

6662-6(d)) shall be treated as having established reasonable cause under subparagraph (B)(i) if: (a) the documentation was in existence at the time the return was filed (i

The regulations prescribe two categories of documents that a taxpayer must maintain to satisfy the contemporaneous documentation requirements: Principal Documents

These documents need not be in existence at the time the return is filed but must be maintained and produced upon request

The principal documents must be in existence when the return is filed

business overview, organizational description) need not be entirely rewritten each year, the economic analysis, comparables data, and supporting calculations must be updated annually to reflect the facts and circumstances of the specific tax year