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attributable to a substantial understatement. An understatement
of tax is considered substantial if the understatement exceeds 10
percent of the proper income tax for the year. Sec.
6661(b)(1)(A). The 25-percent addition will not apply to any
items for which there was substantial authority or items which
were adequately disclosed on the Federal income tax return. Sec.
6661(b)(2)(B).
Petitioner primarily cites Selfe v. United States, 778 F.2d
769 (11th Cir. 1985), as substantial authority for the position
that there was basis in DRPC. The Selfe opinion, which was
rejected by this Court in Estate of Leavitt v. Commissioner, 90
T.C. 206 (1988), held that a guaranty by the shareholders of an S
corporation which borrowed money would give rise to basis.
Petitioner also argues that at the time of filing of the returns,
Selfe had not yet been rejected. See Doe v. Commissioner, T.C.
Memo. 1993-543; Keech v. Commissioner, T.C. Memo. 1993-71; Nigh
v. Commissioner, T.C. Memo. 1990-349. Petitioners filed their
1987 return on November 4, 1988, and their 1988 return on October
17, 1989.
We are not persuaded by petitioner. This Court rejected
Selfe in Estate of Leavitt v. Commissioner, supra, on February
10, 1988, and was affirmed on May 19, 1989. Petitioners can no
longer depend upon Selfe. We think there was no substantial
authority supporting of petitioners' position, and we hold for
respondent.
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