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imposed by section 6662(a). Rule 142(a); Tweeddale v.
Commissioner, 92 T.C. 501, 506 (1989).
Petitioners argue that they are not liable for the addition
to tax under section 6661(a) and the accuracy-related penalty
under section 6662(d) because they did not understate their tax
on their 1988 and 1989 returns. We disagree for reasons given
above.
Petitioners argue that section 6662 was first effective for
tax years beginning after December 31, 1989. We disagree.
Section 6662 applies to returns due after December 31, 1989.
Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec.
7721(a), 103 Stat. 2106, 2395. This includes petitioners' 1989
return.
If a taxpayer has substantial authority for the
tax treatment of any item on the return, the understatement
is reduced by the amount attributable to it. Sec.
6661(b)(2)(B)(i). The amount of the understatement is reduced
for any item adequately disclosed on the taxpayer's return or in
a statement attached to the return. Sec. 6661(b)(2)(B)(ii). The
accuracy-related penalty does not apply to any part of an
underpayment for which there was reasonable cause and with
respect to which the taxpayer acted in good faith. Sec. 6664(c).
Petitioners do not contend that these exceptions apply here. We
conclude that petitioners are liable for the section 6661(a)
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