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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). If a taxpayer has substantial authority for the
tax treatment of any item on the return, the understatement is
reduced by the amount attributable to such authority. Sec.
6661(b)(2)(B)(i). Similarly, the amount of the understatement is
reduced for any item adequately disclosed either on the
taxpayer's return or in a statement attached to the return. Sec.
6661(b)(2)(B)(ii). Because petitioner has presented no argument
on this issue other than to deny the underlying deficiencies,
respondent's determination is sustained.
Issue 3. Accuracy-Related Penalty, Sec. 6662
Respondent determined that petitioners are liable for the
accuracy-related penalty pursuant to section 6662 for taxable
years 1989 and 1990 because the underpayment of income tax for
such years was attributable to a substantial understatement.
Again, respondent's determination is benefited by a presumption
of correctness. Rule 142(a).
The accuracy-related penalty is equal to 20 percent of the
portion of an underpayment to which section 6662 applies. Sec.
6662(a). Section 6662(b)(2) provides that section 6662 applies
to an underpayment attributable to any substantial understatement
of income tax. A substantial understatement is one that exceeds
the greater of 10 percent of the tax required to be shown on the
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