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not report wages from Nick's Auto in the amount of $3,250; (2)
petitioner deducted $5,593 in personal expenses as rental
property deductions on Schedule E; (3) petitioner deducted
$10,737 in personal expenses as business deductions on Schedule
C; (4) petitioner did not report income from her embezzlement
activities in the amount of $13,975; (5) petitioner did not make
payments in restitution until taxable years 1989, 1990, and 1991;
and (6) there is a deficiency of $5,844 in petitioner's income
tax for taxable year 1988.
The deemed admissions establish the amounts of petitioner's
tax deficiencies for the years at issue. Accordingly, we shall
grant summary judgment on this issue.
Issue 2. Substantial Understatement
The next issue for decision is whether petitioner is liable
for additions to tax for substantial understatement of her
Federal income tax pursuant to section 6661 for taxable years
1987 and 1988. Section 6661 provides for an addition to tax in
the amount of 25 percent of the amount of any underpayment
attributable to a substantial understatement of tax. A
substantial understatement exists if the amount of the
understatement for the taxable year exceeds the greater of (i) 10
percent of the tax required to be shown on the return, or (ii)
$5,000. Sec. 6661(b)(1)(A).
We observe that, in the deemed admissions, petitioner is
deemed to admit the following:
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