- 56 -
comply with his demand. At the time, petitioner was aware that
Newtowne was in dire financial straits and did not have other
contracts. Petitioner's failure to report the $7,800 as income
is fraudulent given the manner in which the check was obtained
and petitioner's attempt to characterize it as a gift.
(c) Section 6661
Respondent determined that petitioner is liable for the
additions to tax under section 666112 for 1982, 1983, and 1984.
Respondent's determinations are presumed correct, and
petitioner bears the burden of proving otherwise. Rule 142(a);
Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972).
Section 6661(a) provides for an addition to tax equal to 10
percent of the amount of any underpayment attributable to a
substantial understatement of tax. An understatement, for
purposes of this addition to tax, is the amount by which the
amount required to be shown on a return exceeds the amount
actually reported on the return. Sec. 6661(b)(2); Tweeddale v.
Commissioner, 92 T.C. 501, 505 (1989). An understatement is
substantial if it exceeds the greater of $5,000 or 10 percent of
the tax required to be shown on the return. Sec. 6661(b)(1)(A).
12 Sec. 6661 is applicable to returns required to be filed
after Dec. 31, 1982.
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