addition to tax for negligence under section 6653(a) for each of
the taxable years in issue.
VIII. Substantial Understatement
Section 6661(a) imposes an addition to tax equal to 25
percent of the amount attributable to a substantial
understatement. An understatement is substantial if it exceeds
the greater of 10 percent of the tax required to be shown on the
return or $5,000. Sec. 6661(b)(1).
If an item is not attributable to a tax shelter, then any
understatement may be reduced by amounts represented by items for
which a taxpayer had substantial authority or which were
adequately disclosed in the return or in a statement attached
thereto. Sec. 6661(b)(2)(B)(i) and (ii).
Although the legal standards for evaluating section 183
cases are well-developed, petitioners have not argued or shown
that there was substantial authority for their tax treatment of
any of the items of income or expense that were adjusted by
respondent or that any of the adjusted items were adequately
disclosed on the returns for the period in controversy.
Accordingly, to the extent that petitioners' understatement, for
any taxable period under consideration, is substantial within the
meaning of section 6661, petitioners are liable for the addition
to tax for a substantial understatement under section 6661.
To reflect the foregoing and to reflect concessions and
agreements of the parties,
Decision will be entered under
Rule 155.
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