- 12 - 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,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011