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option program does not obviate Henry's responsibility to ensure
that the 1982 return was accurately filed. See LaVerne v.
Commissioner, 94 T.C. at 652-653; Pritchett v. Commissioner, 63
T.C. at 174; see generally sec. 1.6661-6(b), Income Tax Regs.
Accordingly, we hold that petitioners are liable for the
additions to tax for negligence.
Substantial Understatement Addition to Tax
Next, petitioners contend that respondent erred in
determining additions to tax for substantial understatements
under section 6661. Section 6661(a) imposes an addition to tax
when there is a "substantial understatement of income tax for any
taxable year". As applicable here, the addition to tax under
section 6661(a) is equal to 25 percent of the underpayment
attributable to the substantial understatement. Pallottini v.
Commissioner, 90 T.C. 498 (1988). Petitioners bear the burden of
proving that the addition to tax under section 6661 is not
applicable. Rule 142(a).
Section 6661(b)(2)(A) defines "understatement" as the
excess of the amount of tax required to be shown on the return
over the amount of tax actually reported on the return. This
understatement will be "substantial" if the amount of such
understatement exceeds the greater of 10 percent of the amount of
tax required to be shown on the return for the taxable year, or
$5,000. Sec. 6661(b)(1)(A).
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