- 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