Barbara Ann Tudyman - Page 36

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               Petitioner has no tax or accounting background.  She used a              
          competent contractor to contemporaneously estimate the amount of              
          damage to her home.  She was reasonably careful in preparing her              
          loss estimate, and she reasonably relied on her accountant to                 
          prepare her return.  She gave her accountant all necessary                    
          information to prepare her return.  She attached to Form 4684,                
          Casualties and Thefts, a detailed inventory of her personal                   
          property loss and the $202,200 reduction in the value of her real             
          property by the San Mateo County tax assessor's office.  She                  
          hired a personal property appraiser to verify her estimates of                
          her personal property loss.  Petitioner made a reasonable attempt             
          to figure the amount of her casualty loss.  We hold that she was              
          not negligent.                                                                
               2.   Substantial Understatement                                          
               The next issue for decision is whether petitioner is liable              
          for the addition to tax for substantial understatement of income              
          tax under section 6661(a) for tax years 1985-87.  Section 6661(a)             
          provides for an addition to tax in the amount of 25 percent of                
          the amount of any underpayment attributable to a substantial                  
          understatement of income tax.                                                 
               An understatement is the amount by which the correct tax                 
          exceeds the tax reported on the return.  Sec. 6661(b)(2)(A).  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.              

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