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sufficiently disclosed to his accountant his transactions with
Pecaris, and that petitioners reasonably relied on the way in
which their accountant treated the transaction on the joint
return.
The characterization of the Mall transaction and partnership
allocation rules present complex legal issues, on which there can
be reasonable differences of opinion. See Yelencsics v.
Commissioner, 74 T.C. 1513, 1533 (1980); cf. Marcello v.
Commissioner, 43 T.C. 168, 182 (1964), affd. and remanded in part
380 F.2d 499 (5th Cir. 1967). Petitioner's beliefs that the
credits should not be included in the amount realized by Pecaris
or in the computation of its taxable gain and that there was a de
facto amendment to the Pecaris partnership agreement that
relieved him from the allocation of gain that we hold him
accountable for, were not completely untenable. We reject
respondent's imposition of the addition to tax for negligence.
B. Section 6661 Substantial Understatement Addition
Respondent determined that petitioners are liable for the
addition to tax for substantial understatement of income tax in
1988. Income tax is substantially understated if the amount of
the understatement exceeds the greater of 10 percent of the tax
required to be shown on the return for the taxable year or
$5,000. Sec. 6661(b)(1)(A). Section 6661(a) provides for an
addition to tax equal to 25 percent of the amount of any
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