- 14 -
require their bookkeeper to do so, even though she, in the
initial stages, had done so. Petitioners are required to report,
as income, the amount of the excess in their check exchanges with
M&L.
Respondent also determined that petitioners are liable for
substantial understatement penalties under section 6662.
Petitioners bear the burden to show they are not liable for the
penalty. Rule 142(a); Bixby v. Commissioner, 58 T.C. 757, 791-
792 (1972). Section 6662 imposes the penalty on any portion of
an underpayment of tax required to be shown on a return if, as
pertinent here, there is any substantial understatement of income
tax. Sec. 6662(b)(2). A substantial understatement exists if
the amount of the understatement for the taxable year exceeds the
greater of 10 percent of the amount of tax required to be shown
on the return or $5,000. Sec. 6662(d)(1). A substantial
understatement may be reduced for any item reported for which
there was substantial authority or for which there was adequate
disclosure of the facts. Sec. 6662(d)(2)(B). Substantial
authority requires a showing that the weight of authorities
supporting a taxpayer's position is substantial in relation to
those supporting a contrary view. Antonides v. Commissioner, 91
T.C. 686, 702 (1988), affd. 893 F.2d 656 (4th Cir. 1990). In
addition, no penalty will be applied to any portion of an
underpayment if there was a reasonable cause for such portion and
the taxpayer acted in good faith. Sec. 6664(c)(1).
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