(A) In general A taxpayer shall be treated as having a reasonable belief with respect to the tax treatment of an item only if such belief
(i) is based on the facts and law that exist at the time the return of tax which includes such tax treatment is filed, and
(ii) relates solely to the taxpayers chances of success on the merits of such treatment and does not take into account the possibility that a return will not be audited, such treatment will not be raised on audit, or such treatment will be resolved through settlement if it is raised.
(B) Certain opinions may not be relied upon
(i) In general An opinion of a tax advisor may not be relied upon to establish the reasonable belief of a taxpayer if
(I) the tax advisor is described in clause (ii), or
(II) the opinion is described in clause (iii).
(ii) Disqualified tax advisors A tax advisor is described in this clause if the tax advisor
(I) is a material advisor (within the meaning of section
6111 (b)(1)) and participates in the organization, management, promotion, or sale of the transaction or is related (within the meaning of section
267 (b) or
707 (b)(1)) to any person who so participates,
(II) is compensated directly or indirectly by a material advisor with respect to the transaction,
(III) has a fee arrangement with respect to the transaction which is contingent on all or part of the intended tax benefits from the transaction being sustained, or
(IV) as determined under regulations prescribed by the Secretary, has a disqualifying financial interest with respect to the transaction.
(iii) Disqualified opinions For purposes of clause (i), an opinion is disqualified if the opinion
(I) is based on unreasonable factual or legal assumptions (including assumptions as to future events),
(II) unreasonably relies on representations, statements, findings, or agreements of the taxpayer or any other person,
(III) does not identify and consider all relevant facts, or
(IV) fails to meet any other requirement as the Secretary may prescribe.