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Petitioner must prove that respondent erred in determining that
the accuracy-related penalty applied to the instant years. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); see also
Allen v. Commissioner, 925 F.2d 348, 353 (9th Cir. 1991), affg.
92 T.C. 1 (1989); Bixby v. Commissioner, 58 T.C. 757, 791-792
(1972). Respondent erred if petitioner's understatement did not
exceed the greater of 10 percent of the tax required to be shown
on the return or $5,000. See sec. 6662(d)(1). For this purpose,
an amount was not understated to the extent it was based on
substantial authority or adequately disclosed in the return or in
a statement attached to the return. Sec. 6662(d)(2)(B).
We disagree with respondent that petitioner was subject to
an accuracy-related penalty in either of the years at issue. We
look to petitioner's 1991 and 1992 tax returns, and we find that
petitioner disclosed adequately the relevant facts of his
treatment of the $50,000 and $47,350 deductions.3 Respondent
argues that petitioner's disclosure is inadequate because he
relied on section 1244 to exclude these amounts from his gross
income, and he has abandoned that position in this proceeding.
We disagree. The test of adequate disclosure does not rest
solely on whether a taxpayer has identified the correct section
of the Code to support a reported deduction. What is critical is
3 We also note that the carryover arose from a purported
loss in 1988, and that petitioner made a similar disclosure on
his 1988 Form 1040.
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