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and remanded on other grounds 259 F.2d 300 (5th Cir. 1958);
Vaughan v. Commissioner, 15 B.T.A. 596 (1929). Petitioners have
failed to meet either of these burdens. We sustain respondent’s
determination on this issue.
2. Service Income/Self-Employment Tax
Respondent determined that petitioners failed to report
$10,000 of personal service income for 1986. Respondent also
determined that this amount was subject to self-employment tax.
A self-employment tax is imposed on income in excess of $400
derived by an individual from a trade or business. Secs. 1401,
1402(b) and (c).
Petitioners presented no evidence on these issues, and the
record does not otherwise disprove respondent’s determination on
the issues. We sustain respondent's determination.
3. Substantial Understatements--Section 6661
Section 6661 imposes an addition to tax for substantial
understatements. The amount of the section 6661 addition to tax
for additions assessed after October 21, 1986, equals 25 percent
of the amount attributable to the substantial understatement.
Pallottini v. Commissioner, 90 T.C. 498, 500-503 (1988). An
understatement is substantial if it exceeds the greater of
10 percent of the tax required to be shown on the return or
$5,000. Sec. 6661(b)(1)(A). An understatement is reduced to the
extent it is: (1) Based on substantial authority, or (2)
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