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10 percent of the tax required to be shown on the Federal income
tax return or $5,000. Sec. 6661(b)(1)(A).
For purposes of section 6661, the amount of the
understatement is reduced to the extent that the understatement
is attributable to items with respect to which the taxpayer's tax
treatment of the items is or was supported by substantial
authority. Sec. 6661(b)(2)(B).
We have concluded that petitioners fraudulently failed to
report substantial amounts of income on their respective Federal
income tax returns. Petitioners did not have substantial
authority for their failure to report as income those adjustments
made by respondent which we have sustained. We sustain the
adjustments made by respondent, and petitioners are liable for
the section 6661 additions to tax as determined by respondent.
Decisions will be entered
under Rule 155.
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