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or direct connection to the sale of the tax-shelter product.
Therefore, petitioner is liable for the additions to tax for
negligence for 1980 under section 6653(a) and for 1981, 1982, and
1983 under section 6653(a)(1) and (2).
Respondent, in an amendment to the answer, alleged in the
alternative, if petitioner was not found liable for an addition
to tax under section 6659 for the 1982 taxable year, that
petitioner should be found liable for an addition under section
6661. Section 6661 provides for a 25-percent addition if there
is a substantial understatement. An understatement is
substantial when it exceeds the greater of $5,000 or 10 percent
of the amount of tax required to be shown on the return. Sec.
6661(b)(1)(A). Respondent points out that the income tax
deficiency for 1982 resulting from petitioner's investment in
Evergreen exceeded $5,000 and that petitioner has conceded that
he is liable for that portion of the deficiency.
Section 6661(b)(2)(B)(i) and (ii) provides for reductions in
the understatement to the extent that there was adequate
disclosure or substantial authority. In the case of a tax
shelter, however, the adequate disclosure exception does not
apply, and in addition to having substantial authority, a
taxpayer must have reasonably believed it to be more likely than
not that the tax treatment was proper. Sec. 6661(b)(2)(C)(i)(I)
and (II).
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