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payments in 1989. Therefore, respondent's determination is
sustained.
We next consider whether petitioners are liable for the
addition to tax for substantially understating their income tax.
Sec. 6662(b)(2). A substantial understatement is one that
exceeds the greater of 10 percent of the tax required to be shown
or $5,000. Sec. 6662(d)(1). Any understatement is reduced by an
item that is adequately disclosed or for which there was
substantial authority for its tax treatment.
Petitioners' failure to report the gain from the sale of
Sunshine Liquor resulted in a $34,079 understatement of income
tax. This amount is in excess of $5,000, and exceeds 10 percent
of the amount of tax required to be shown on the return.
Next, we must decide if petitioners adequately disclosed
their position or had substantal authority. Section
6662(d)(2)(B)(ii) defines a disclosed item as one regarding
which "the relevant facts affecting the item's tax treatment are
adequately disclosed in the return or in a statement attached to
the return". The statute does not set forth what constitutes
adequate disclosure of relevant facts. Schirmer v. Commissioner,
89 T.C. 277, 285 (1987). Under generally applicable regulatory
authority, however, respondent may prescribe the form of such
disclosure. H. Conf. Rept. 97-760 (1982), 1982-2 C.B. 600, 650;
Schirmer v. Commissioner, supra at 285.
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