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including: Closing costs ($2,000), prorated property taxes
($80.44), and loan origination fees paid by the purchaser
($2,368.75).6 While petitioner erred in reporting these amounts
collectively as mortgage interest on his 1989 Schedule A, he is
nevertheless entitled to the following deductions: (1) Mortgage
interest--$7,532.08, and (2) property taxes--$80.44. The $2,000
closing costs were reflected above as a selling expense in
calculating petitioner's gain from the sale of the Richmond
property. Petitioner is not entitled to deduct the loan
origination fees because they were not paid by him.
Finally, respondent determined an addition to petitioner's
tax for 1989 under section 6662(a) in the amount of $7,681.
Section 6662 imposes an accuracy-related penalty on a substantial
understatement of income tax. The section provides that if there
is a substantial understatement of income tax, there shall be
added to the tax an amount equal to 20 percent of the amount of
any underpayment attributable to such understatement. The
taxpayer bears the burden of proving that the Commissioner's
determination as to the addition to tax under section 6662(a) is
erroneous. Rule 142(a).
An understatement is substantial if it exceeds the greater
of 10 percent of the tax required to be shown on the return or
$5,000. Sec. 6662(d)(1)(A). An understatement is the difference
6 The amounts petitioner claims make up the mortgage
interest deduction total $11,981.27, or $399.27 more than the
deduction reported on petitioner's return. Petitioner did not
offer an explanation for this discrepancy.
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