- 143 -
calculating understatements, items for which there was
substantial authority or adequate disclosure are not to be
considered. Secs. 6661(b)(2)(B)(i) and (ii), 6662(d)(2)(B)(i)
and (ii).
Petitioners argue that there was no understatement, and, if
the Court determines that there was a substantial understatement,
the addition to tax should be waived because there was reasonable
cause for the understatement and petitioners acted in good faith.
We are not persuaded that petitioners acted in good faith or
that they had reasonable cause for the understatements.
Petitioners' failure to submit Forms 5472 was an attempt at
concealment, not disclosure. Accordingly, respondent's
determination will be sustained.
B. Increased Interest
Former section 6621(c) applies to tax returns with a due
date prior to December 31, 1989, and provides for an increase in
the rate of interest on underpayments. The rate is increased to
120 percent of the statutory rate on underpayments that exceed
$1,000 and are attributable to tax-motivated transactions.
Tax-motivated transactions include "any sham or fraudulent
transaction." Sec. 6621(c)(3)(A)(v).
Petitioners argue that they are not liable for the increased
rate because they did not engage in any sham or fraudulent
transactions. We have previously concluded that petitioners
engaged in several tax-motivated transactions that lacked
Page: Previous 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 NextLast modified: May 25, 2011