-10-
petitioners' plight, having legal title to the Montclair property
in the names of Mr. De Ocampo's parents could permit the sale of
the property to a third party, and perhaps allow petitioners to
avoid payment of tax on the gain from the sale of the Curtis
property.
To summarize, petitioners did not meet the purchase
requirement of section 1034. See Marcello v. Commissioner, 380
F.2d at 502 n.7. Accordingly, we hold that petitioners are required
to recognize gain from the sale of their Curtis property in 1989.
Issue 2. Accuracy-Related Penalty
Respondent determined an accuracy-related penalty pursuant to
section 6662(a) for petitioners' 1989 tax year. Section 6662
imposes a penalty equal to 20 percent of the portion of an
underpayment of tax that is attributable to any substantial
understatement of tax. Sec. 6662(a) and (b)(2). An understatement
of tax is substantial when it exceeds the greater of 10 percent of
the tax required to be shown on the return or $5,000. Sec.
6662(d)(1)(A). The amount of an understatement will be reduced if
a taxpayer has substantial authority for the way an item was
treated, or if the facts that affect the item's tax treatment are
adequately disclosed in the return. Sec. 6662(d)(2)(B). A
taxpayer has the burden of proving that respondent's determination
of an addition to tax is in error. Luman v. Commissioner, 79 T.C.
846, 860-861 (1982).
The accuracy-related penalty does not apply to any portion of
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