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1988 and (2) under section 6662 for 1989. The section 6662
addition applies with respect to the entire underpayment for
1989.
Section 6661 Additions for Substantial Understatement
In the notice of deficiency issued to NITCO, respondent
determined that NITCO was liable for additions to tax for
substantial understatement of income tax liability under section
6661 for 1987 and 1988. In the notice of deficiency issued to
the Mussmans, respondent determined the Mussmans were liable for
an addition to tax for substantial understatement under section
6661 for 1988.
Section 6661 provides for an addition to tax for substantial
understatement of income tax equal to 25 percent of the amount of
the underpayment attributable to such understatement for the
taxable year. To be considered substantial, the understatement
must exceed the greater of $5,000 ($10,000 in the case of a
corporation like NITCO) or 10 percent of the tax required to be
shown on the return. Sec. 6661(b)(1). The amount of the
understatement is reduced by the portion of the understatement
attributable to any nontax shelter item for which there is either
substantial authority for the taxpayer's return position or
adequate disclosure on the return. Sec. 6661(b)(2)(B).
NITCO understated its tax for 1987 and 1988; the Mussmans
understated their tax for 1988. These respective understatements
were substantial. Petitioners have not asserted that the
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