Catherine Chimblo and Estate of Gus Chimblo, Deceased, Catherine Chimblo, Executrix - Page 12

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            Omnibus Budget Reconciliation Act of 1986, Pub. L. 99-509, sec.                              
            8002(c), 100 Stat. 1874, 1951; Licari v. Commissioner, 946 F.2d                              
            690, 692 (9th Cir. 1991), affg. T.C. Memo. 1990-4; Pallottini v.                             
            Commissioner, 90 T.C. 498 (1988).                                                            
                  Section 6661(b)(1)(A) provides that a substantial                                      
            understatement of income tax exists if the amount of the                                     
            understatement exceeds the greater of:  (1) 10 percent of the tax                            
            required to be shown on the return; or (2) $5,000.  An                                       
            understatement is defined as the excess of the amount of tax                                 
            required to be shown on the return for the taxable year over the                             
            amount of tax imposed which is shown in the return, reduced by                               
            any rebate.  Sec. 6661(b)(2)(A).  In the instant case,                                       
            petitioners' understatements of income tax for 1983 and 1984 are                             
            $12,387 and $12,577, respectively, and are therefore substantial.                            
            The entire amounts of the understatements are due to petitioners'                            
            disallowed losses and investment tax credits claimed with respect                            
            to the Barrister partnership.                                                                
                  In general, section 6661(b)(2)(B) provides that the                                    
            understatement is deemed to be reduced to the extent it is                                   
            attributable to:  (1) The tax treatment of an item for which                                 
            there was substantial authority; or (2) any item with respect to                             
            which the relevant facts affecting the item's tax treatment are                              
            adequately disclosed in the return or in a statement attached to                             
            the return.  In the case of items attributable to a tax shelter,                             
            the understatement may not be reduced by reason of disclosure,                               




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