- 23 - purposes, and we so find. We believe that petitioner was negligent in not reporting the $408,318 on his 1987 return, and we so find. We sustain respondent's additions to tax under section 6653(a)(1)(A) and (B) in their entirety. B. Substantial Understatement of Income Tax Liability For returns due before January 1, 1990, section 6661 provides for an addition to tax equal to 25 percent of the amount of any underpayment attributable to a substantial understatement. An understatement is "substantial" when the understatement for the taxable year exceeds the greater of (1) 10 percent of the tax required to be shown or (2) $5,000. The understatement is reduced to the extent that the taxpayer has (1) adequately disclosed his or her position, or (2) has substantial authority for the tax treatment of an item. Sec. 6661; sec. 1.6661-6(a), Income Tax Regs. Petitioner bears the burden of proving that he is not subject to the addition to tax determined by respondent. Rule 142(a). Petitioner’s understatement for the taxable year exceeded 10 percent of the tax required to be shown. It is therefore substantial under section 6661. Petitioner argues, however, that there was substantial authority for his treatment of the item. Specifically, petitioner argues that he "reported the transaction consistently with an award from the New York court and consistently with the treatment of such item by the Lipsig Firm." Section 1.6661-3(b)(2), Income Tax Regs., lists the types ofPage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
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