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understatement under section 6661 for 1985 is computed based upon
10 percent of the underpayment as opposed to the 25-percent rate
used in the notice of deficiency; (2) respondent is collaterally
estopped in this case from litigating a second time the issue
resolved by the District Court in petitioner's criminal case
concerning the amount of petitioner's profits from his illegal
activities; (3) petitioner is not required to substantiate the
amount of the net operating loss (NOL) reported in his 1987 tax
return and carried back to 1985 and 1986 on the ground that the
period of limitations with respect to 1987 has expired; (4) the
NOL that petitioner reported in his 1987 tax return accrued on
December 31, 1987; and (5) consistent with the holding of the
District Court in the criminal case, petitioner did not earn
profits from his criminal enterprise in 1986 and 1987.
Respondent filed an objection to petitioner's motion. In
particular, respondent contends that she properly computed the
addition to tax under section 6661 based upon 25 percent of the
underpayment (rather than 10 percent) because the 1986 amendment
to section 6661 increasing the rate from 10 percent to 25 percent
is effective with respect to assessments made after enactment of
the amendment. In addition, respondent maintains that
petitioner's motion should be denied to the extent that
petitioner asserts that respondent is barred by the doctrine of
collateral estoppel from contesting the District Court's findings
in the criminal case inasmuch as the District Court's decision
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Last modified: May 25, 2011