- 42 - that the tax treatment of the items giving rise to the losses from either the computer equipment activity or the telecommunications activity was more likely than not the proper treatment. Accordingly, petitioners cannot claim that there was substantial authority that would allow them to reduce the amounts of understatements on their returns. See sec. 6661(b)(2)(b) and (c). Other than substantial authority, petitioners have set forth no other pertinent defenses to the additions for substantial understatement of liability. We find that petitioners are liable for such additions as determined by respondent. III. Increased Interest Respondent also seeks increased interest pursuant to section 6621(c). That section provides for an increase in the interest rate to 120 percent of the statutory rate on underpayments of tax if a substantial understatement is due to a tax-motivated transaction. Certain transactions are deemed to be "tax motivated" by section 6621(c)(3), including any loss disallowed under section 465(a). Sec. 6621(c)(3)(A)(ii). Since we have concluded that the loss deductions in issue stemming from the installment notes are disallowed under section 465(a), we also find that the activities were tax-motivated transactions, and respondent is entitled to additional interest on the interestPage: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
Last modified: May 25, 2011