Harry D. Bledsoe and Annie L. Bledsoe - Page 24

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                  Any such understatements are reduced by that portion for                              
            which there is "substantial authority" or where the transaction                             
            has been "adequately disclosed".  For 1987 and 1988, there were                             
            several items determined by respondent, some of which were                                  
            sustained by this Court.  Petitioners have not shown that,                                  
            factually or legally, there was substantial authority for the                               
            items composing the understatements.  Furthermore, petitioners                              
            did not adequately disclose their legal fee deductions through                              
            Resthaven.  Regarding the section 1244 stock sale, however, we do                           
            find adequate disclosure in petitioners' 1988 tax return.                                   
            Through an attached statement, petitioners fully disclosed the                              
            identity of the corporation, their proposed section 1244 basis,                             
            and the date that the corporation closed.  Therefore, for                                   
            purposes of the section 6661 addition to tax, petitioners'                                  
            understatement is reduced by that portion which relates to                                  
            petitioners' section 1244 stock deduction.                                                  
                  For 1989, respondent seeks the accuracy-related penalty                               
            under section 6662.  As we have already discussed the issue of                              
            petitioners' negligence with respect to their 1989 year, we shall                           
            address only the substantial understatement aspect of section                               
            6662.  Respondent determined that petitioners' deficiency was $9.                           
            The amount of income tax required to be shown on their return was                           
            over $70,000.  For 1989, petitioners' understatement of $9                                  

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