- 16 -
tax credits arising out of the GD&L container leasing program
and that they did not reasonably rely upon the advice of a
competent adviser. It follows that petitioners did not make a
bona fide and reasonable estimate of their tax liabilities by
relying on that same adviser, who utilized the GD&L deductions
and credits in estimating their 1984 Federal tax liability for
purposes of obtaining a filing extension. Thus, we conclude that
petitioners did not properly estimate their 1984 tax liability,
the extension request was not valid, and the 1984 return was not
timely filed. Therefore, we hold that petitioners are liable for
the 1984 addition to tax for delinquency under section
6651(a)(1).8
Section 6661(a) Addition to Tax
Section 6661(a) provides for an addition to tax equal to 25
percent of an underpayment attributable to a substantial
understatement of tax. Section 6661(b)(1)(A) defines a
substantial understatement as the greater of 10 percent of the
tax required to be shown or $5,000. The amount of the
understatement may be reduced by an amount for which there was
substantial authority for the treatment adopted by the taxpayers
on their return. Sec. 6661(b)(2)(B)(i). This reduction is not
available in the case of a tax shelter unless, in addition, the
8 This addition to tax applies to the entire deficiency
for 1984, Indeed petitioners have conceded that it applies to
the portion of the deficiency in income taxes resulting from the
disallowance of deductions and credits attributable to the
Winthrop Trust.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011