- 24 -
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
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011