Galedrige Construction, Inc. - Page 11

          asserts that at the time it filed its return for its taxable year           
          ended June 30, 1989, its use of the cash method in its asphalt              
          paving business was based upon substantial authority.                       
               The standard of substantial authority requires that, when              
          the facts and authorities are analyzed with respect to the                  
          taxpayer's case, the weight of the authorities that support the             
          taxpayer's position should be substantial when compared with                
          those supporting the contrary position.  Sec. 1.6661-3(b)(1),               

                    (B) Special rule for corporations.--In the case of                
                    a corporation other than an S corporation or a personal           
                    holding company (as defined in section 542),                      
                    paragraph (1) shall be applied by substituting                    
                    "$10,000" for "$5,000".                                           
          (2) Understatement.--                                                       
                    (A) In general.--For purposes of                                  
                    paragraph    (1), the term, "Understatement"                      
                    means the excess    of--                                          
                         (i) the amount of the tax required                           
                         to be shown on the return for the                            
                         taxable year, over                                           
                         (ii) the amount of tax imposed                               
                         which is shown on the return,                                
                         reduced by any rebate(within the                             
                         meaning of section 6211(b)(2)).                              
                    (B) Reduction for understatement due to                           
                    position of taxpayer or disclosed item.--The                      
                    amount of the understatement under subparagraph                   
                    (A) shall be reduced by that portion of the                       
                    understatement which is attributable to--                         
                         (i) the tax treatment of any item                            
                         by the taxpayer if there is or was                           
                         substantial authority for such                               
                         treatment, * * *                                             

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Last modified: May 25, 2011