Chong-Kak and Sang-Ok Lee - Page 29

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               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              

          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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