Walton A. Sutherland - Page 23

                                       - 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 of                




Page:  Previous  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  Next

Last modified: May 25, 2011