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understatement is the amount by which the amount required to be
shown on the return exceeds the amount actually shown on the
return. Sec. 6661(b)(2). Petitioner's case meets this threshold
requirement.
Petitioner admitted in her petition that Barbados was a tax
shelter. Thus, the adequate disclosure exception of section
6661(b)(2)(B)(ii) does not apply. Sec. 6661(b)(2)(C). Moreover,
even if Barbados was not a tax shelter, petitioner does not
qualify for the adequate disclosure exception because she has not
shown that she provided sufficient information on her return to
enable the Commissioner to identify the potential controversy
involved.
If, however, a taxpayer has substantial authority for the
tax treatment of a tax shelter item on her return and reasonably
believed her tax treatment of the item was more likely than not
the proper tax treatment, the understatement is reduced by the
amount attributable to such item. Sec. 6661(b)(2)(B)(i). The
only evidence in the record concerning petitioner's evaluation of
the economic aspects of the partnership is her testimony that she
"overlooked their documents" and relied on Mr. Maerki's
recommendation. In short, petitioner presented insufficient
evidence to show that she or her adviser made the kind of
independent factual analysis of Barbados that would enable her to
formulate a reasonable belief as to the tax treatment of the item
and to determine whether the claimed loss was more likely than
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