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Section 6661(a), applicable to petitioners' 1988 tax year,
provides for an addition to tax in the amount of 25 percent of
the amount of any underpayment attributable to a substantial
understatement. The amount of the understatement generally is
reduced by the portion of the understatement attributable to (1)
the tax treatment of an item if there was substantial authority
for such treatment, or (2) any item with respect to which the
relevant facts affecting the item's tax treatment are adequately
disclosed in the return or in a statement attached to the return.
Sec. 6661(b)(2)(B). The requirements of adequate disclosure can
be satisfied by providing, on the return, information sufficient
to enable the Commissioner to identify the potential controversy
involved. Schirmer v. Commissioner, 89 T.C. 277, 285-286 (1987).
Kolyn's 1988 return reported, on Schedule L, increases in
Kolyn's long-term liabilities. Petitioners contend that this
information adequately disclosed the funds Kolyn received. We
conclude that the mere disclosure of an increase in long-term
liabilities was insufficient to enable respondent to identify the
potential controversy (i.e., whether petitioners failed to report
income). Accordingly, petitioners are liable for the section
6661(a) additions to tax.
C. Accuracy-Related Penalties
Section 6662(a), applicable to petitioners' 1989 through
1991 tax years, imposes an accuracy-related penalty in an amount
equal to 20 percent of the portion of any underpayment to which
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