Charles A. Ballard - Page 19

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          the firm to assure that tax returns of managing directors                   
          contained matters properly reported.  Barry M. Strauss testified,           
          and we are satisfied, that Associates’ personnel were qualified             
          as tax experts, reviewed petitioner’s returns, were aware of                
          Ballard Marine’s activities, and advised petitioner that his                
          reporting positions were proper.1  Petitioner can rely on such              
          advice to avoid an addition to tax for negligence.  See, e.g.,              
          Horn v. Commissioner, 90 T.C. 908, 942 (1988); Conlorez Corp. v.            
          Commissioner, 51 T.C. 467, 475 (1968).  Accordingly, we have                
          found that petitioner was not negligent, and we sustain no                  
          addition to tax for negligence.                                             
               B.  Substantial Understatement of Liability                            
               Respondent has determined an addition to tax under section             
          6661 for 1987.  Section 6661(a) provides for an addition to the             
          tax for any year for which there is a substantial understatement            
          of income tax.  A substantial understatement is defined as an               
          understatement which exceeds the greater of 10 percent of the tax           
          required to be shown on the return for the year or $5,000.  Sec.            
          6661(b)(1)(A).  The amount of the addition to tax is 25 percent             
          of the underpayment attributable to a substantial understatement.           
          Pallottini v. Commissioner, 90 T.C. 498 (1988).  The amount of              
          the understatement, however, is reduced by amounts attributable             

          1    That extends to certain adjustments relating to itemized               
          deductions that were the subject of the second stipulation of               
          facts and that were conceded by petitioner.                                 

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