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error in respondent's determination that these additions to tax
should be imposed against them.
Petitioners have failed to demonstrate that they were not
negligent or that they had a reasonable basis for claiming any of
the deductions in dispute. Petitioners have not satisfied their
burden of proof and accordingly, the additions to tax under
section 6653(a) and section 6653(a)(1) and (2) are sustained.
Section 6661(a) provides for an addition to tax equal to 25
percent of an underpayment when there is a substantial
understatement of income tax for the taxable year. Section
6661(b)(2)(A) defines the term "understatement" as being the
excess of (i) the amount of tax required to be shown on the
return for the taxable year over (ii) the amount shown on the
return. Section 6661(b)(1)(A) provides that an understatement is
substantial if it exceeds the greater of (i) 10 percent of the
amount of tax required to be shown on the return or (ii) $5,000.
For this latter purpose, an understatement is reduced to the
extent it is either based on substantial authority or adequately
disclosed in the return or in a statement attached to the return.
Sec. 6661(b)(2)(B).
Petitioners have not presented any evidence to refute
respondent's determination under section 6661. Accordingly,
petitioners have not carried their burden of proof, and
respondent's determination with respect to the imposition of the
section 6661 penalty is sustained.
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