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purchased numerous luxury items during the years in issue,
including new Mercedes Benz automobiles, an expensive boat, and
various residences. Petitioners' 1986 financial statement
indicates that their joint net worth increased since Mr. Streck's
bankruptcy.17 The financial statement indicates that petitioners
owned valuable furs and jewelry. We find that Mrs. Streck failed
to show she did not significantly benefit from the understatement
of taxes.
The next issue concerns petitioners' liability for additions
to tax under sections 6653(a) and 6661. Respondent determined
that petitioners are liable for additions to tax for negligence
or intentional disregard of rules or regulations under section
6653(a)(1)(A) and (B) for the taxable year 1986. As in effect
during 1986, section 6653(a)(1)(A) imposed an addition to tax
equal to 5 percent of the underpayment of tax where any part of
the underpayment was due to negligence or disregard of rules or
regulations. Section 6653(a)(1)(B) imposed an addition to tax in
an amount equal to 50 percent of the interest payable under
section 6601 with respect to the portion of the underpayment
which was attributable to negligence.
Respondent also determined that petitioners are liable for
the addition to tax for substantial understatement of income tax
17There is nothing to indicate Mrs. Streck's separate
financial status prior to petitioners' financial statement as of
Sept. 30, 1986.
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