- 9 - years at issue was due to negligence. Accordingly, respondent’s determination is sustained on this issue. Substantial Understatement Respondent determined that petitioners are liable for an addition to tax for a substantial understatement of income tax under section 6661 for taxable year 1988. The amount of the section 6661 addition to tax for additions assessed after October 21, 1986, is equal to 25 percent of the amount of any underpayment attributable to the substantial understatement. Omnibus Budget Reconciliation Act of 1986, Pub. L. 99-509, sec. 8002, 100 Stat. 1951; Pallottini v. Commissioner, 90 T.C. 498, 501-503 (1988). A “substantial understatement” occurs when an understatement exceeds the greater of $5,000 or 10 percent of the amount of tax required to be shown on a return. Sec. 6661(b)(1)(A). An “understatement” means the excess of the amount of the tax required to be shown on a return over the amount of tax imposed which is shown on the return. Sec. 6661(b)(2)(A). Section 6661(b)(2)(B) provides for the reduction of an understatement by that portion of the understatement which is attributable to either: (1) The tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment; 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011