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petitioners are not liable for the addition to tax under section
6651 for taxable year 1990 as determined by respondent.
Issue 3. Section 6662 Substantial Understatement
Respondent determined that petitioners are liable for the
section 6662(a) penalty for 1990. Section 6662(a) imposes an
accuracy-related penalty in an amount equal to 20 percent of the
underpayment of tax attributable to one or more of the items set
forth in section 6662(b). In the notice of deficiency,
respondent based the determination of the section 6662(a) penalty
on petitioners' underpayment being due to a substantial
understatement. See sec. 6662(b)(2). A "substantial
understatement" occurs when an understatement exceeds the greater
of $5,000 or 10 percent of the amount of tax required to be shown
on a return. Sec. 6662(d)(1)(A). An "understatement" means the
excess of the amount of the tax required to be shown on a return
over the amount of tax imposed which is shown on the return,
reduced by any rebate (within the meaning of section 6211(b)(2)).
Sec. 6662(d)(2)(A).
The accuracy-related penalty under section 6662(b)(2) does
not apply with respect to any portion of an underpayment if it is
shown that there was reasonable cause for such portion and that
petitioners acted in good faith with respect to such portion.
Sec. 6664(c)(1). The determination of whether petitioners acted
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