-10-
substantial understatement occurs in the case of a corporation
where the understatement exceeds the greater of 10 percent of the
amount of the tax required to be shown on the return or $10,000.
The amount of the addition to tax under section 6661(a) is
equal to 25 percent of any underpayment attributable to the
understatement. Where an item is not attributable to a tax
shelter,4 the understatement may be reduced by the amount
attributable to that item, and the addition to tax accordingly
reduced, if the taxpayer's treatment of the item was based on
substantial authority. Sec. 6661(b)(2)(B)(i).5 Petitioner
4 See sec. 6661(b)(2)(C)(i). Petitioner's asphalt paving
activity does not constitute a "tax shelter" as defined for
purposes of sec. 6661. See sec. 6661(b)(2)(C)(ii).
5 Sec. 6661 provides in pertinent part as follows:
SEC. 6661(a). Addition To Tax.--If there is a
substantial understatement of income tax for any
taxable year, there shall be added to the tax an amount
equal to 25 percent of the amount of any underpayment
attributable to such understatement.
(b) Definition And Special Rule.--
(1) Substantial Understatement.--
(A) In general.--For purposes of this section,
there is a substantial understatement of income tax
for any taxable year if the amount of the
understatement exceeds the greater of--
(i) 10 percent of the tax required
to be shown on the return for the
taxable year, or
(ii) $5,000.
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011