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the taxable year or (2) $5,000. Sec. 6661(b)(1). The amount of
the understatement is reduced by the portion attributable to (1)
the tax treatment of any item if there is or was substantial
authority for such treatment or (2) any item with respect to
which the relevant facts are adequately disclosed. Sec.
6661(b)(2)(B).
The understatements of income tax for 1985 through 1988 were
substantial. No authority exists for petitioners’ failure to
report income. Petitioners did not disclose any facts concerning
the unreported items in their returns. Petitioners are liable
for the additions to tax under section 6661 for 1985 through
1987, and Mr. Gandy is liable for that addition to tax for 1988.
To reflect the above holdings,
Decisions will be entered
under Rule 155.
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