Raymond N. Rosenthal and Peggy S. Rosenthal - Page 7

                                         -  -7                                           
               THE COURT:  Well, but you must have had some understanding             
               of whether--if she remarried or if she died, you would                 
                    still have to pay this for a full forty-eight months.             
               THE WITNESS:  I had that under--we never discussed                     
          remarriage at all, but they said I'm going to have to pay this              
          for forty-eight months.                                                     
               THE COURT:  Whether she lived or died?                                 
               THE WITNESS:  Yes.                                                     

          The provision in the settlement agreement that the spousal                  
          support was reportable by wife and deductible by husband is                 
          merely an attempt to agree to a legal conclusion that is contrary           
          to the necessary legal conclusion following from the provision              
          for the payments to continue after petitioner's former wife's               
          death.  An incorrect understanding of the law by the parties to             
          that agreement does not change the law applicable to petitioner's           
          case.                                                                       
               Also at issue is whether petitioners are liable for the                
          accuracy-related penalties under section 6662(a).  Under section            
          6662, a 20-percent addition to tax is imposed on the portion of             
          the underpayment that is attributable to one or more of the                 
          following:  (1) Negligence or disregard of the rules or                     
          regulations; (2) substantial understatement of tax; (3) valuation           
          overstatement; (4) overstatement of pension liabilities; and (5)            
          estate or gift tax valuation understatements.  Respondent                   
          concedes that only negligence and substantial understatement of             
          tax would have application to the facts in this case.                       





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