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D. Additions to Tax
Section 6651(a)(1) imposes an addition to tax for failure to
file a return on the date prescribed (determined with regard to
any extension of time for filing) unless it is shown that such
failure is due to reasonable cause and not due to willful
neglect. The taxpayer has the burden of showing the addition is
improper. United States v. Boyle, 469 U.S. 241, 245 (1985).
If any part of the underpayment is due to negligence or
disregard of rules or regulations, there shall be added to the
tax an amount equal to 5 percent of the underpayment. Sec.
6653(a)(1) (for 1985); sec. 6653(a)(1)(A) (for 1986 and 1987).
There is a further addition to tax in an amount equal to 50
percent of the interest payable with respect to the portion of
the underpayment that is attributable to negligence. Sec.
6653(a)(2) (for 1985); sec. 6653(a)(1)(B) (for 1986 and 1987).
Section 6661 provides for a 25-percent addition to tax on
any substantial understatement. Pallottini v. Commissioner, 90
T.C. 498 (1988). A substantial understatement is one that
exceeds the greater of 10 percent of the tax required to be shown
on the return or $5,000. Sec. 6661(b)(1). The amount of the
understatement, for purposes of section 6661, is to be reduced by
the portion attributable to any item for which there was
substantial authority or any item that was adequately disclosed.
Sec. 6661(b)(2)(B).
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