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required to be shown on the return or $5,000. Sec.
6661(b)(1)(A).
If a taxpayer has substantial authority for his tax
treatment of any item on the return, the understatement is
reduced by the amount attributable thereto. Sec.
6661(b)(2)(B)(i). Similarly, the amount of understatement is
reduced for any item adequately disclosed either on the
taxpayer's return or in a statement attached to the return. Sec.
6661(b)(2)(B)(ii).
Section 6662(a), applicable for 1989, imposes an addition to
tax of 20 percent of the underpayment of tax if any portion of
the underpayment is due to a substantial understatement of income
tax. Sec. 6662(b)(2). "Understatement" is defined as the excess
of (1) the amount of the tax required to be shown on the return
for the taxable year, over (2) the amount of the tax imposed that
is shown on the return. Sec. 6662(d)(2)(A). Except for items
attributable to tax shelters, an understatement is reduced to the
extent that it is based on an item which is adequately disclosed
in the return or in a statement attached to the return or for
which there is substantial authority for the taxpayer's position.
Sec. 6662(d)(2)(B). A substantial understatement of income tax
occurs where the amount of the understatement exceeds the greater
of (1) 10 percent of the tax required to be shown on the return
or (2) $5,000. Sec. 6662(d)(1).
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