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Accordingly, we conclude that petitioner has failed to carry his burden
of proof on this issue, and we hold that petitioner is liable for the addition
to tax under section 6651(a)(1).
Issue 8. Addition To Tax--Substantial Understatement of Income Tax
Respondent has determined an addition to tax under section 6661(a) for
substantial understatement of income tax for each of the years in issue.
Section 6661(a) imposes an addition to tax on a substantial
understatement of income tax. The section provides that if there is a
substantial understatement of income tax, there shall be added to the tax an
amount equal to 25 percent of the amount of any underpayment attributable to
such understatement. Sec. 6661(a). The taxpayer bears the burden of proving
that the Commissioner's determination as to the addition to tax under section
6661(a) is erroneous. Rule 142(a).
An understatement is substantial where it exceeds the greater of 10
percent of the tax required to be shown on the return or $5,000. Sec.
6661(b)(1)(A). An understatement is the difference between the amount
required to be shown on the return and the amount actually shown on the
return. Sec. 6661(b)(2); Tweeddale v. Commissioner, 92 T.C. 501 (1989); Woods
v. Commissioner, 91 T.C. 88 (1988). The section 6661 addition to tax is not
applicable, however, if there was substantial authority for the taxpayer's
treatment of the items in issue or if relevant facts relating to the tax
treatment of those items were disclosed on the return. Sec. 6661(b)(2)(B)(i),
(ii).
Neither exception applies here. Accordingly, we hold that petitioner is
liable for the addition to tax under section 6661.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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