Anthony and Linda Walters - Page 28

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          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.                  








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