- 16 -- 16 -
We also sustain respondent's determination under section
6661, which provides for an addition to tax where the taxpayer
makes a substantial understatement of income tax liability. A
"substantial understatement" is described as an understatement
that exceeds the greater of 10 percent of the tax required to be
shown on the return or $5,000. Sec. 6661(b)(1)(A). The evidence
establishes that petitioners' tax liability falls within these
parameters, and we sustain respondent's determination on this
issue.5
Decision will be entered
under Rule 155.
5 Petitioners, for the first time in their reply brief, raise
a new issue as to whether CCMI in 1983 had sufficient earnings
and profits to support the taxability of the $184,630 in
constructive distributions from CCMI that we have concluded
petitioners received in 1983. This issue is untimely raised by
petitioners. It would now be prejudicial to respondent to allow
this new issue to be raised, and we treat this issue as waived.
See Seligman v. Commissioner, 84 T.C. 191, 198 (1985), affd. on
other grounds 796 F.2d 116 (5th Cir. 1986); Graham v.
Commissioner, 79 T.C. 415, 423-424 (1982). Nevertheless, we have
examined the record and find nothing to support petitioners’
argument as to the lack of earnings and profits. To the
contrary, Howard's uncontroverted testimony indicates that the
offshore trusts were funded with net profits of CCMI.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Last modified: May 25, 2011