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and the statement of facts, we find that petitioner received
proceeds from his illegal drug activities, which were expended
to purchase the listed property, in total amounts as follows:
1985--$17,774; 1986--$179,209; 1987--$30,939. Therefore, except
as necessary to reflect that one adjustment, we sustain
respondent’s determination of deficiencies.4
III. Additions to Tax for Substantial Understatement of
Liability
Respondent also determined that petitioner substantially
understated his income tax liability and is liable for the
additions to tax under section 6661 for 1986 and 1987. The
amount of an addition to tax for a substantial understatement of
income tax for a taxable year, which addition is assessed after
October 21, 1986, equals 25 percent of the amount of any
underpayment attributable to such substantial understatement.
Sec. 6661(a); Pallottini v. Commissioner, 90 T.C. 498, 500-503
(1988). A substantial understatement of income tax is defined as
an understatement of tax that exceeds the greater of 10 percent
of the tax required to be shown on the return for the year or
$5,000, whichever is greater. Sec. 6661(b)(1)(A). Petitioner
has assigned error to respondent’s determination of a section
4 On brief, respondent states that $179,000 is the amount of
the 1986 expenditures. That amount is slightly different from
the amount set forth in the notice of deficiency. It appears
that the brief is in error.
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