Edward and Ruth Kelly - Page 21

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            status, (B) his stated ability to open his own office and deal as                             
            any other broker does, * * * Groetzinger did apply to Mr. Kelly's                             
            option trading activities as an ROP". (Emphasis added.)  However,                             
            Mr. Kelly has not shown by his own testimony or otherwise that                                
            his status as a registered options principal in fact entitled him                             
            to open his own office and deal in options.  Thus he has not                                  
            satisfied his burden of showing that he provided his accountant                               
            with complete and accurate information on this material point.                                
            We therefore reject Mr. Kelly's claim of reliance on his                                      
            accountant.  The additions to tax under section 6653(a) are                                   
            accordingly sustained.                                                                        
                  Respondent further determined that petitioners are liable                               
            for the additions to tax under section 6661.  Section 6661                                    
            imposes an addition to tax equal to 25 percent of the amount of                               
            any underpayment attributable to a substantial understatement of                              
            income tax.  An understatement is substantial if it exceeds the                               
            greater of 10 percent of the tax required to be shown on the                                  
            return or $5,000.  Sec. 6661(a) and (b)(1).  The amount of the                                
            understatement is reduced by that portion which is attributable                               
            to:  (1) The tax treatment of any item for which there was                                    
            substantial authority, or (2) any item with respect to which the                              
            relevant facts affecting the item's tax treatment are adequately                              
            disclosed in the return or in a statement attached to the return.                             
            Sec. 6661(b)(2)(B).                                                                           





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