- 31 -
158, 173 (1978). We sustain respondent's determination that the
corporate petitioner was negligent with respect to its
underpayments.
Addition to Tax under Section 6661
Respondent has determined an addition to tax under section
6661 for substantial understatement of tax for the corporate
petitioner's taxable year ended September 30, 1988. This
addition applies when the understatement of income tax of a
corporate taxpayer exceeds the greater of (1) 10 percent of the
tax required to be shown on the return for the taxable year, or
(2) $10,000. Sec. 6661(b)(1). The understatement for purposes
of this addition shall be reduced where there is substantial
authority for the tax treatment of any item or if there was
adequate disclosure, in or attached to the return, of the
relevant facts affecting any item. Sec. 6661(b)(2)(B).
The corporate petitioner has presented no argument in
objection to this addition. Since the amount of the
understatement for the taxable year ended September 30, 1988, is
substantial, we sustain respondent's determination on this issue.
The Suttons
Rebate and Coupon Checks
Respondent contends that Mr. Sutton diverted the proceeds of
the cashed rebate and coupon checks from the corporate petitioner,
thereby receiving constructive dividends. Petitioners allege that
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