- 29 -
c. Time-Sensitive Additions to Tax
Respondent also determined additions to Hamalee's 1985 and
1986 taxes under section 6653(b)(2) and section 6653(b)(1)(B),
respectively, and additions to the Lees' 1987 tax under section
6653(b)(1)(B). In accordance with our discussion above, we find
that: (1) The entire amount of Hamalee's 1985 and 1986
underpayments was due to fraud, and (2) the entire amount of the
Lees' 1987 underpayment was due to fraud. We so hold.
6. Additions to Tax for Substantial Understatement
Additions to tax for substantial understatement of income
tax equal 25 percent of the amount attributable to the
substantial understatement. Sec. 6661(a); Pallottini v.
Commissioner, 90 T.C. 498, 500-503 (1988). An understatement is
substantial if it exceeds the greater of 10 percent of the tax
13(...continued)
Memorandum Opinion of this Court, dated Oct. 17, 1949, and allege
that the Lees had a limited knowledge of the English language
that hindered their ability to understand the tax practices of
the United States, and, thus, they are not liable for fraud. We
disagree. Although we acknowledge the similarity in these cases
on the narrow point of unfamiliarity of business customs, the
evidence adduced at trial, especially undercover transcripts and
the tax books that omitted large amounts of income, leads us to
conclude that the Lees were not as unfamiliar as they claim.
While this Court can understand the difficulties presented to
those who do not speak the English language, this fact, standing
alone, does not offset the overwhelming indicia of fraud against
the Lees and Hamalee.
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