1120 Schedule UTP Instructions for Form 1120 Schedule UTP

Note: The form, instructions, or publication you are looking for
begins after this coversheet.
Please review the updated information below.
Clarification to the instructions for providing concise descriptions for
undisclosed tax positions (UTPs) on Schedule UTP (Form 1120), Part
III
For tax positions which would otherwise be reported on Forms 8275, Disclosure Statement, or 8275-R,
Regulation Disclosure Statement, the concise description of UTPs in Schedule UTP, Part III, should
include the information required under those forms.
If you are disclosing a position contrary to a rule (such as a statutory provision or IRS revenue ruling)
reportable on Form 8275, you must identify the rule by name. See the Instructions for Form 8275.
For tax positions reportable on Form 8275-R, enter the full citation for each regulation for which you have
taken a contrary position. The citation should specify the section number, including all designations of
smaller units (lettered or numbered subsections, paragraphs, subparagraphs, and clauses) to which the
contrary position relates. For example, enter "1.482-7(d)(1)(iii)" instead of "482 regs" or "1.482-7.”

Instructions for
Schedule UTP (Form 1120)

Department of the Treasury
Internal Revenue Service

(Rev. December 2019)

Uncertain Tax Position Statement
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Schedule UTP
(Form 1120) and its instructions, such
as legislation enacted after they were
published, go to IRS.gov/ScheduleUTP.

General Instructions
Purpose of Schedule

Schedule UTP asks for information
about tax positions that affect the U.S.
federal income tax liabilities of certain
corporations that issue or are included
in audited financial statements and have
assets that equal or exceed $10 million.

Reporting Uncertain
Tax Positions
on Schedule UTP
Tax positions to be reported.
Schedule UTP requires the reporting of
each U.S. federal income tax position
taken by an applicable corporation on
its U.S. federal income tax return for
which two conditions are satisfied.
1. The corporation has taken a tax
position on its U.S. federal income tax
return for the current tax year or for a
prior tax year.
2. Either the corporation or a related
party has recorded a reserve with
respect to that tax position for U.S.
federal income tax in audited financial
statements, or the corporation or related
party did not record a reserve for that
tax position because the corporation
expects to litigate the position.
A tax position for which a reserve
was recorded (or for which no reserve
was recorded because of an
expectation to litigate) must be reported
regardless of whether the audited
financial statements are prepared based
on U.S. generally accepted accounting
principles (GAAP), International
Financial Reporting Standards (IFRS),
or other country-specific accounting
standards, including a modified version

Dec 20, 2019

of any of the above (for example,
modified GAAP).
If the corporation reconsiders
whether a reserve is required for a tax
position and eliminates the reserve in an
interim audited financial statement
issued before the tax position is taken in
a return, the corporation need not report
the tax position to which the reserve
relates on Schedule UTP.
A tax position is based on the unit of
account used to prepare the audited
financial statements in which the
reserve is recorded (or in which no
reserve was recorded because of an
expectation to litigate). A tax position
taken on a tax return is a tax position
that would result in an adjustment to a
line item on that tax return if the position
is not sustained. If multiple tax positions
affect a single line item on a tax return,
report each tax position separately on
Schedule UTP. See Tax position taken
on a tax return, later.
Reporting current year and prior
year tax positions. Tax positions
taken by the corporation on the current
year’s tax return are reported in Part I.
Tax positions taken by the corporation
on a prior year’s tax return are reported
on Part II. A corporation is not required
to report a tax position it has taken in a
prior tax year if the corporation reported
that tax position on a Schedule UTP
filed with a prior year tax return. If a
transaction results in tax positions taken
on more than one tax return, the tax
positions must be reported in Part I of
the Schedule UTP attached to each tax
return in which a tax position is taken
regardless of whether the transaction or
a tax position resulting from the
transaction was disclosed in a
Schedule UTP filed with a prior year’s
tax return. See Example 7 and
Example 8, later. Do not report a tax
position on Schedule UTP before the
tax year in which the tax position is
taken on a tax return by the corporation.
If, after a subsidiary member leaves a
consolidated group, the subsidiary, or a
related party of the subsidiary, records a
reserve in an audited financial
statement with respect to one of the
subsidiary’s tax positions in its former
Cat. No. 55028G

group’s prior return, the subsidiary
should report the tax position on Part II
of the Schedule UTP filed with its
current tax return, if it files a separate
return. If the subsidiary is included in the
return of another consolidated group
that is required to file Schedule UTP, the
common parent of that consolidated
group should report the tax position on
Part II of the Schedule UTP filed with its
current tax return.
Concise description of tax position.
A corporation that reports a tax position
in either Part I or Part II is required to
provide a concise description of each
tax position in Part III. See Example 12
and Example 13, later.
Consistency with financial statement
reporting. The analysis of whether a
reserve has been recorded for the
purpose of completing Schedule UTP is
determined by reference to those
reserve decisions made by the
corporation or a related party for audited
financial statement purposes. If the
corporation or a related party
determined that, under applicable
accounting standards, either no reserve
was required for a tax position taken on
a tax return because the amount was
immaterial for audited financial
statement purposes, or that a tax
position was sufficiently certain so that
no reserve was required, then the
corporation need not report the tax
position on Schedule UTP. For a
corporation subject to FASB
Interpretation No. (FIN) 48, a tax
position is considered “sufficiently
certain so that no reserve was required,”
and therefore need not be reported on
Schedule UTP, if the position is “highly
certain” within the meaning of FIN 48.
Transition rule. A corporation is not
required to report on Schedule UTP a
tax position taken in a tax year
beginning before January 1, 2010, even
if a reserve is recorded with respect to
that tax position in audited financial
statements issued in 2010 or later.
SeeExample 9, later. In addition, a
corporation is not required to report
accruals of interest on a tax reserve
recorded with respect to a tax position
taken on a pre-2010 tax return.

Periods covered. File Schedule UTP
with the corporation’s current year's tax
return.

Who Must File

A corporation must file Schedule UTP
for the current tax year if:
1. The corporation files Form 1120,
U.S. Corporation Income Tax Return;
Form 1120-F, U.S. Income Tax Return
of a Foreign Corporation; Form 1120-L,
U.S. Life Insurance Company Income
Tax Return; or Form 1120-PC, U.S.
Property and Casualty Insurance
Company Income Tax Return;
2. The corporation has assets that
equal or exceed $10 million;
3. The corporation or a related party
issued audited financial statements
reporting all or a portion of the
corporation’s operations for all or a
portion of the corporation’s tax year; and
4. The corporation has one or more
tax positions that must be reported on
Schedule UTP.
Do not file a blank Schedule UTP if
there are no tax positions to be
reported.
Attach Schedule UTP to the
corporation's income tax return. Do not
file it separately. A taxpayer that files a
protective Form 1120, 1120-F, 1120-L,
or 1120-PC must also file Schedule UTP
if it satisfies the four requirements set
forth above.
A corporation required to file
Schedule UTP must also check “Yes” to
Form 1120, Schedule K, Question 14;
Form 1120-F, Additional Information,
Question AA; Form 1120-L,
Schedule M, Question 15; or Form
1120-PC, Schedule I, Question 13.

Computation of assets that equal or
exceed $10 million. For the following
corporate income tax returns:
Forms 1120, 1120-L, and 1120-PC.
A corporation’s assets equal or exceed
$10 million if the amount reported on
page 1, item D of Form 1120, or the
higher of the beginning or end of year
total assets reported on Schedule L of
Form 1120-L or Form 1120-PC, is at
least $10 million.
Form 1120-F. The assets of a
corporation filing a Form 1120-F equal
or exceed $10 million if the higher of the
beginning or end of year total worldwide
assets of the corporation reported on
Form 1120-F, Schedule L, line 17,
would be at least $10 million if the
corporation were to prepare a
Schedule L on a worldwide basis.

Affiliated groups. An affiliated group
of corporations filing a consolidated
return will file one Schedule UTP for the
affiliated group. The affiliated group
need not identify the member of the
group to which the tax position relates
or which member recorded the reserve
for the tax position. Any affiliate that files
its U.S. federal income tax return
separately and satisfies the
requirements set forth above must file a
Schedule UTP with its return setting
forth its own tax positions.

Definitions and Special Rules

Note. All examples in these instructions
assume the calendar year is the
reporting year both for U.S. federal
income tax and financial statement
purposes and the independent auditor’s
opinion on the audited financial
statements is issued before the filing of
the tax return.
Audited financial statements.
Audited financial statements mean
financial statements on which an
independent auditor has expressed an
opinion, whether qualified, unqualified,
disclaimed, or adverse, under GAAP,
IFRS, or another country-specific
accounting standard, including a
modified version of any of the above (for
example, modified GAAP). Compiled or
reviewed financial statements are not
audited financial statements.
Record a reserve. A corporation or a
related party records a reserve for a
U.S. federal income tax position when a
reserve for U.S. federal income tax,
interest, or penalties with respect to that
position is recorded in audited financial
statements of the corporation or a
related party. A reserve is recorded
when an uncertain tax position or a FIN
48 liability is stated anywhere in a
corporation’s or related party’s financial
statements, including footnotes and any
other disclosures, and may be indicated
by any of several types of accounting
journal entries. Some of the types of
entries that, entered alone or in tandem,
indicate the recording of a reserve are
(1) an increase in a current or
non-current liability for income taxes,
interest or penalties payable, or a
reduction of a current or non-current
receivable for income taxes and/or
interest with respect to the tax position;
or (2) a reduction in a deferred tax asset
or an increase in a deferred tax liability
with respect to the tax position.
The initial recording of a reserve will
trigger reporting of a tax position taken
on a return. However, subsequent

-2-

reserve increases or decreases with
respect to the tax position will not.
If a corporation is included in multiple
audited financial statements, the
corporation must report a tax position on
Schedule UTP if a reserve for that
position was recorded in any of those
audited financial statements.
Example 1. General rule regarding
recording a reserve. A corporation
recorded a reserve in its 2018 audited
financial statements relating to a tax
position taken on its tax return for the
2018 tax year. The corporation filed its
2018 tax return on October 15, 2019.
The corporation reported the 2018 tax
position on Part I of Schedule UTP and
filed Schedule UTP with its 2018 tax
return. If the corporation increases its
reserve with respect to the tax position
taken on its 2018 tax return in its 2020
audited financial statements, the
corporation is not required to report the
2018 tax position again on its 2020 tax
return as a result of the reserve increase
in 2020.
Example 2. Reporting reserves in
subsequent years. A corporation
claimed a deduction in 2017 and
determined under applicable accounting
standards that it could recognize the full
benefit of the position. In 2019, the IRS
began an examination of the 2017 tax
return and decided to examine whether
the deduction was proper. The
corporation subsequently reevaluated
the tax position and recorded a reserve
for that position in 2019. The
corporation has taken a tax position in
its 2017 tax return and recorded a
reserve with respect to that tax position.
The corporation must report the tax
position on Schedule UTP filed with its
2019 tax return even if the IRS identifies
the tax position for examination prior to
the recording of the reserve.
Related party. A related party is any
entity that has a relationship to the
corporation that is described in section
267(b), 318(a), or 707(b), or any entity
that is included in consolidated audited
financial statements in which the
corporation is also included.
Example 3. Related party general
rule. Corporation A is a corporation
filing Form 1120 that has $160 million of
assets. Corporation B is a foreign
corporation not doing business in the
United States and is a related party to
Corporation A. Corporations A and B
issue their own audited financial
statements. Corporation A takes a tax
position on its tax return. If Corporation
B records a reserve with respect to that

Instructions for Schedule UTP (Form 1120)

tax position in its own audited financial
statements, even though Corporation A
does not, then that tax position must be
reported by Corporation A on its
Schedule UTP.
Example 4. Reserve recorded in
consolidated financial statements.
Corporation C files a tax return and has
assets of $160 million. Corporations C
and D issue consolidated audited
financial statements, but they do not file
a consolidated tax return. Corporation C
takes a tax position for which a reserve
was recorded in the consolidated
financial statements of Corporations C
and D. The tax position taken by
Corporation C on its tax return must be
reported on its Schedule UTP because
a reserve was recorded for its tax
position in consolidated financial
statements in which Corporation C was
included.
Reserve not recorded based on expectation to litigate. A corporation
must report on Schedule UTP a tax
position taken on its return for which no
reserve for income tax was recorded if
the tax position is one which the
corporation or a related party
determines the probability of settling
with the IRS to be less than 50% and,
under applicable accounting standards,
no reserve was recorded in the audited
financial statements because the
corporation intends to litigate the tax
position and has determined that it is
more likely than not to prevail on the
merits in the litigation.
Example 5. Reserve not recorded
after a change in circumstances
based on expectation to litigate. A
corporation takes a tax position on its
2017 tax return for which no reserve is
recorded because the corporation
determined the tax position is correct.
Circumstances change, and in 2019 the
corporation determined that the tax
position was uncertain, but did not
record a reserve because of its
expectation to litigate the position. That
is, the corporation or a related party
determines the probability of settling
with the IRS to be less than 50% and,
under applicable accounting standards,
no reserve was recorded because the
corporation intends to litigate the tax
position and has determined that it is
more likely than not to prevail on the
merits in the litigation. The corporation
must report that position on Part II of the
Schedule UTP filed with the 2019 tax
return either if it records a reserve or if it
does not record a reserve because it
expects to litigate, even if that decision
to record or not record occurs because

of a change in circumstances in a later
year.
Tax position taken on a tax return. A
tax position taken on a tax return means
a tax position that would result in an
adjustment to a line item on any
schedule or form attached to the tax
return (or would be included in a section
481(a) adjustment) if the position is not
sustained. If multiple tax positions affect
a single line item on a tax return, each
tax position is a separate tax position
taken on a tax return. For example, a tax
position that is reported on a line item
on Form 5471 is a tax position taken on
a return, even though an adjustment to
that line item might not result in the
payment of any additional tax.
A single decision about how to report
an item of income, gain, loss, deduction,
or credit may affect line items in multiple
years’ returns. If so, that decision can
result in a tax position taken on each
affected year’s return. For example, a
decision to amortize an expense rather
than currently deduct that expense, or a
decision to currently deduct rather than
amortize an expense, affects line items
on each year’s return in which the tax
position is taken during the period of
amortization. Whether these tax
positions taken on a return are reported
on Schedule UTP for a particular tax
year, and when they are reported,
depends on whether and when a
reserve is recorded. See Example 7 and
Example 8, later.
Note. Although the use of a net
operating loss (NOL) or a credit
carryforward is a tax position taken on a
tax return, do not report the use of the
NOL or credit carryforward if the
corporation has previously reported the
tax position that created or added to the
NOL or credit carryforward on
Schedule UTP. See Example 10, later.
Unit of account. A unit of account is
the level of detail used in analyzing a tax
position, taking into account both the
level at which the taxpayer prepares
and supports the tax return and the level
at which the taxpayer anticipates
addressing the issue with the IRS. The
unit of account used by a GAAP or
modified GAAP taxpayer for reporting a
tax position on Schedule UTP must be
the same unit of account used by the
taxpayer for GAAP or modified GAAP.
In the case of audited financial
statements prepared under accounting
standards other than GAAP or modified
GAAP, a corporation that issues audited
financial statements with a unit of
account that is based upon the entire

Instructions for Schedule UTP (Form 1120)

-3-

tax year may not use that unit of account
for Schedule UTP. The corporation must
instead identify a unit of account based
on similar principles applicable to GAAP
or modified GAAP taxpayers, or use any
other level of detail that is consistently
applied if that identification is
reasonably expected to apprise the IRS
of the identity and nature of the issue
underlying the tax position taken on the
tax return.
Example 6. Unit of account.
Corporation A and Corporation B each
have two individual research projects
and each anticipates claiming a
research and development credit arising
out of their projects. Corporation A
chooses each individual research
project as the unit of account for GAAP
financial reporting purposes, since the
corporation accumulates information for
the tax return about the projects at the
project level and expects the IRS to
address the issues during an
examination of each project separately.
Corporation B determines that the
appropriate unit of account for GAAP
financial reporting purposes is the
functional expenditures, based on the
amount of its expenditures, the
anticipated credits to be claimed, its
previous experience, and the advice of
its tax advisors. Based on the unit of
account used for financial reporting
purposes, Corporation A must use each
project as its unit of account for
Schedule UTP reporting, and
Corporation B must use functional
expenditures as its unit of account for
Schedule UTP reporting, regarding the
research and development credit.

Ranking Tax Positions by Size

The corporation must rank by size each
tax position listed in Part I. The size of a
tax position, however, need not be
reported anywhere on Schedule UTP.
See the instructions for Part I, column
(f), regarding coding to be used to rank
the corporation’s tax positions.

Size. The size of each tax position is
determined on an annual basis and is
the amount of U.S. federal income tax
reserve recorded for that position. If a
reserve is recorded for multiple tax
positions, then a reasonable allocation
of that reserve among the tax positions
to which it relates must be made in
determining the size of each tax
position.
If an amount of interest or penalties
relating to a tax position is not
separately identified in the books and
records as associated with that position,
then that amount of interest and

penalties is not included in the size of a
tax position used to rank that position or
compute whether the position is a major
tax position.
Expectation to litigate. Do not
determine a size for positions listed
because of an expectation to litigate.
See the instructions for Parts I and II,
column (f), regarding ranking of these
positions.
Affiliated groups. The determination
of the size of a tax position taken in a tax
return by an affiliated group filing a
consolidated return is to be determined
at the affiliated group level for all
members of the affiliated group.

Coordination With Other
Reporting Requirements

A complete and accurate disclosure of a
tax position on the appropriate year’s
Schedule UTP will be treated as if the
corporation filed a Form 8275,
Disclosure Statement, or Form 8275-R,
Regulation Disclosure Statement,
regarding the tax position. A separate
Form 8275 or Form 8275-R need not be
filed to avoid certain accuracy-related
penalties with respect to that tax
position.

Comprehensive Examples
Example 7. Multiple year
positions. A corporation incurred an
expenditure in 2017 and claimed the
entire amount as a deduction on its
2017 return. During the course of
reviewing its tax positions for purposes
of establishing reserves for U.S. federal
income taxes for its 2017 audited
financial statements, the corporation
determined it was uncertain whether the
expenditure should instead be
amortized over 5 years and records a
reserve with respect to the position
taken in 2017. The corporation did not
record a reserve for any of the positions
taken in tax years 2018 through 2021.
The corporation has taken a tax position
in each of the 5 tax years because, on
each year’s tax return, there would be
an adjustment to a line item on that
return if the position taken in that year’s
return is not sustained. The tax position
taken in the 2017 tax year must be
reported on Part I of Schedule UTP filed
with the 2017 tax return. None of the
2018 to 2021 tax positions must be
reported on Schedule UTP because the
corporation did not record a reserve
with respect to any of those tax
positions.
Example 8. Multiple year
positions. A corporation incurred an

expenditure in 2018 and took the
position that the expenditure may be
amortized over 15 years beginning on
its 2018 tax return. During the course of
reviewing its tax positions for purposes
of establishing reserves for U.S. federal
income taxes for its 2018 audited
financial statements, the corporation
determined that it was uncertain
whether any deduction or amortization
of this expenditure is allowable. In the
2018 audited financial statements, the
corporation recorded a reserve with
respect to the amortization deduction to
be claimed in each tax year. The
corporation has taken a tax position in
each of the 15 tax years because on
each year’s tax return there would be an
adjustment to a line item on that return if
the position taken in that year is not
sustained. The corporation must report
the 2018 tax position on Part I of
Schedule UTP for the 2018 tax year. In
addition, the tax position to be taken in
each of the 2019 to 2032 tax years must
be reported on Part I of the
Schedule UTP filed with the tax return
for the respective tax year in which the
tax position was taken. The result would
be the same if, instead of recording the
reserve in 2018 for all of the tax
positions taken in each of the 15 years,
the corporation records a reserve in
each year that specifically relates to the
tax position taken on the return for that
year.
Example 9. Transition rule. The
facts are the same as in Example 8
except that the corporation incurred the
expenditure and recorded the reserve in
2009. The corporation has taken a tax
position in each of the 15 tax years
(2009 through 2023) because on each
year’s tax return there would be an
adjustment to a line item on that return if
the position taken in that year is not
sustained. However, the corporation
was not required to report the tax
position taken in the 2009 tax year
because it was taken in a tax year
beginning before January 1, 2010. The
corporation reports the tax position
taken in each of the 2010 to 2023 tax
years on Part I of the Schedule UTP
filed with its tax return for the respective
tax year in which the position was taken.
Example 10. Creation and use of
net operating loss (NOL). A
corporation incurred a $50 expenditure
in 2018 and claimed the entire amount
as a deduction on its 2018 tax return.
The deduction increases the
corporation’s NOL carryforward from
$100 to $150. The corporation used the
entire $150 NOL carryforward on its
2019 tax return. Claiming the $50
-4-

deduction in 2018 is a tax position taken
in the 2018 tax year because the
position would result in an adjustment to
a line item on the 2018 tax return if the
position is not sustained. The deduction
in 2019 of the NOL carried forward from
2018 is a tax position taken on the 2019
tax return, because the position would
result in an adjustment to a line item on
the 2019 tax return if the position is not
sustained. The corporation recorded a
reserve with respect to its 2018 tax
position in its 2018 audited financial
statements. Because the corporation
recorded a reserve with respect to the
tax position taken in 2018, it reported
the 2018 tax position on the
Schedule UTP filed with its 2018 tax
return. Because it reported the tax
position in its 2018 tax return, the
corporation should not report the 2019
tax position on the Schedule UTP filed
with its tax return for the 2019 tax year.
Example 11. Corporate merger.
On June 30, 2019, MergerCo merges
into AcquiringCo, in a transaction in
which AcquiringCo survives.
MergerCo’s tax year ends on that date.
After the merger, AcquiringCo records a
reserve with respect to a tax position
that is taken on MergerCo’s final return
in its audited financial statements. That
tax position must be reported on Part I
of the Schedule UTP filed with
MergerCo’s 2019 tax return even
though the reserve was recorded by
AcquiringCo. AcquiringCo should not
report the tax position on the
Schedule UTP filed with its 2019 tax
return because MergerCo’s final return
is a prior year tax return on which the tax
position was reported.

Specific Instructions
Part I. Uncertain Tax
Positions for the Current
Tax Year
When To Complete Part I

Complete Part I to report tax positions
taken by the corporation on its current
tax return.

Information From Related Parties
Check the box at the top of Part I if the
corporation was unable to obtain
sufficient information from one or more
related parties and was therefore unable
to determine whether a tax position
taken on its current year’s tax return is
required to be reported in Part I of this
schedule.

Instructions for Schedule UTP (Form 1120)

Column (a). UTP No.

Column (e). Major Tax Position

Enter a number in column (a) for each
tax position reported. The UTP numbers
on Part I, column (a), include a
preprinted “C” prefix to indicate that they
are positions for the current tax year. A
corresponding UTP number with the
letter “C” prefix will be used on Part III
for reporting the concise description of
the tax position. Begin with the number
1, do not skip any whole numbers, do
not enter extraneous characters, and do
not duplicate any numbers (for example,
C1, C2, C3, where the letters “C” are
preprinted on the schedule and the
numbers are entered).

Check this box if the relative size of the
tax position is greater than or equal to
0.10 (10%). The relative size of a tax
position is the amount computed by
dividing the size of that position by the
sum of all of the sizes for all of the tax
positions listed on Parts I and II.
Disregard expectation to litigate
positions for column (e) purposes.
Round amounts using rules similar to
the rules in the Instructions for Form
1120 (or the instructions for the
applicable tax return) for rounding dollar
amounts.

Column (b). Primary IRC Sections
Provide the primary IRC sections (up to
three) relating to the tax position. Enter
one primary IRC section in each box (for
example, “61,” “108,” “263A,” etc.). Do
not include descriptive references or
any other text such as “IRC,” “Section,”
or “IRC Sec.” Beneath each primary IRC
section, you may enter the applicable
IRC subsections (for example, (f)(2)(A)
(ii)), using the preprinted parentheses. If
there are more than four subsection
components, list only the first four.

Column (c). Timing Codes
Check “T” for temporary differences, “P”
for permanent differences, or check
both “T” and “P” for a tax position that
creates both a temporary and
permanent difference. Categorization as
a temporary difference, permanent
difference, or both must be consistent
with the accounting standards used to
prepare the audited financial
statements.

Column (d). Pass-Through Entity
EIN
If the tax position taken by the
corporation relates to a tax position of a
pass-through entity, enter the employer
identification number (EIN) of the
pass-through entity to which the tax
position relates. For example, if the
corporation is a partner in a partnership
and the tax position involves the
partner’s distributive share of an item of
income, gain, loss, deduction, or credit
of the partnership, enter the EIN of the
partnership. A pass-through entity is any
entity listed in section 1(h)(10). If the tax
position is not related to a tax position of
a pass-through entity, leave this blank.
Enter “F” if the pass-through entity is a
foreign entity that does not have an EIN.

Column (f). Ranking of Tax
Position
Enter a letter and a ranking number for
each tax position. Use the letter T for
transfer pricing positions and the letter
G for all other tax positions.
Rank all tax positions in Parts I and II
together, regardless of type. Starting
with the largest size, assign the number
1 to the largest, the number 2 to the next
largest, and so on, in order. This
number is the ranking number for the
tax position. Expectation to litigate
positions may be assigned any ranking
number.
For example, the corporation has one
transfer pricing tax position and two
other tax positions. The transfer pricing
position is the largest and one of the
other tax positions is the expectation to
litigate position. The expectation to
litigate position is assigned a rank of 2.
Enter “T1”for the transfer pricing
position, “G2”for the expectation to
litigate position, and “G3”for the second
other tax position.

Part II. Uncertain Tax
Positions for Prior Tax
Years
When To Complete Part II

Complete Part II to report tax positions
taken by the corporation in a prior tax
year that have not been reported on a
Schedule UTP filed with a prior year’s
tax return. Do not report a tax position
taken in a tax year beginning before
January 1, 2010. See Transition rule
under Reporting Uncertain Tax
Positions on Schedule UTP, earlier.

Information From Related Parties
Check the box at the top of Part II if the
corporation was unable to obtain
sufficient information from one or more

Instructions for Schedule UTP (Form 1120)

-5-

related parties and was therefore unable
to determine whether a tax position
taken on its prior year's tax return is
required to be reported in Part II of this
schedule.

Column (a). UTP No.
Continue the numeric sequence based
on the last UTP number entered on Part
I. For example, if the last UTP listed on
Part I is 3, enter 4 for the first UTP listed
on Part II. The UTP numbers on Part II,
column (a), include a preprinted “P”
prefix to indicate that they are positions
for prior tax years. A corresponding UTP
number with a letter “P” prefix will be
used on Part III for reporting the concise
description of the tax position. Do not
skip any whole numbers, do not enter
extraneous characters, and do not
duplicate any numbers (for example,
P4, P5, P6, where the letters “P” are
preprinted on the schedule and the
numbers are entered).

Column (b). Primary IRC Sections
See the instructions for Part I, column
(b).

Column (c). Timing Codes
See the instructions for Part I, column
(c).

Column (d). Pass-Through Entity
EIN
See the instructions for Part I, column
(d).

Column (e). Major Tax Position
See the instructions for Part I, column
(e).

Column (f). Ranking of Tax
Position
See the instructions for Part I, column
(f).

Column (h). Year of Tax Position
List the prior tax year in which the tax
position was taken and the last month of
that tax year, using a six-digit number.
For example, enter 201712 for tax years
ending December 31, 2017, and
201808 for tax years ending August
2018.

Part III. Concise
Description of UTPs
When To Complete Part III

Part III must be completed for every tax
position listed in Part I or Part II. Enter
the corresponding UTP number from
Part I, column (a) (for example, C1, C2,
C3) or Part II, column (a) (for example,
P4, P5, P6), related to the description.
Concise description. 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 can
reasonably 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.

Examples of Concise Descriptions
for Hypothetical Fact Patterns
The following examples set out a
description of hypothetical facts and the
uncertainties about a tax position that
would be reportable on Schedule UTP.
Following each set of hypothetical facts,
which would not be disclosed on the
schedule, is an example of a sufficient

concise description that would be
reported in Part III to disclose that
hypothetical case.

Example 13. Recharacterization of
distribution as a sale.

Example 12. Allocation of costs
between uncompleted and
completed acquisitions.
Facts. The corporation investigated
and negotiated several potential
business acquisitions during the tax
year. One of the transactions was
completed during the tax year, but all
other negotiations failed and the other
potential transactions were abandoned
during the tax year. The corporation
deducted costs of investigating and
partially negotiating potential business
acquisitions that were not completed
and capitalized costs allocable to one
business acquisition that was
completed. The corporation established
a reserve for financial accounting
purposes in recognition of the possibility
that the amount of costs allocated to the
uncompleted acquisition attempts was
excessive.
Sample concise description. The
corporation incurred costs of completing
one business acquisition and also
incurred costs investigating and partially
negotiating potential business
acquisitions that were not completed.
The costs were allocated between the
completed and uncompleted
acquisitions. The issue is whether the
allocation of costs between
uncompleted acquisitions and the
completed acquisition is appropriate.

-6-

Facts. The corporation is a member
of Venture LLC, which is treated as a
U.S. partnership for tax purposes.
During the tax year, Venture LLC raised
funds through (i) admitting a new
member for a cash contribution and (ii)
borrowing funds from a financial
institution, using a loan partially
guaranteed by the corporation. Also
during the tax year, Venture LLC made
a cash distribution to the corporation
that caused its membership interest in
Venture LLC to be reduced from 25% to
2%. The corporation has taken the
position that the cash distribution is
properly characterized as a nontaxable
distribution that does not exceed its
basis in its Venture LLC interest, but has
established a reserve for financial
accounting purposes, recognizing that
the transaction might be recharacterized
as a taxable sale of a portion of its
Venture LLC interest under section
707(a)(2).
Sample concise description. The
corporation is a member of Venture
LLC, which is treated as a U.S.
partnership for tax purposes. The
corporation received a cash distribution
during the year from Venture LLC. The
issue is the potential application of
section 707(a)(2) to recharacterize the
distribution as a sale of a portion of the
corporation's Venture LLC interest.

Instructions for Schedule UTP (Form 1120)