- 28 - Issue 4. Addition to Tax, Section 6661 Respondent determined that petitioners are liable for the addition to tax pursuant to section 6661 for taxable years 1987 and 1988 due to a substantial understatement of income tax. Respondent's determination carries with it the presumption of correctness. Rule 142(a). The addition is 25 percent of any underpayment attributable to a substantial understatement. Sec. 6661(a); Pallottini v. Commissioner, 90 T.C. 498 (1988). A substantial understatement is one which exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000. Sec. 6661(b)(1)(A). Petitioners make no argument or showing with regard to substantial authority or adequate disclosure. Sec. 6661(b)(2)(B). Petitioners' alternative argument, which is grounded on a theory of ignorance, is without substance. The applicability of this addition to tax turns on the recomputation of petitioners' tax liabilities for 1987 and 1988 in accordance with this opinion. If such recomputation reflects substantial understatements, petitioners are liable for these additions to tax. To reflect the foregoing, Decision will be entered under Rule 155.Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Last modified: May 25, 2011