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attributable to a substantial understatement of income tax. For
any taxable year, an understatement is substantial if the amount
of the understatement exceeds the greater of 10 percent of the
tax required to be shown on the return or $5,000. Sec. 6662(d).
No penalty will be imposed under section 6662(a) with respect to
any portion of an underpayment, if it is shown that there was
reasonable cause for petitioners' position as to that portion,
and that petitioners acted in good faith with respect to that
portion. Sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs.
This determination is based on all of the relevant facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
Because of respondent's concessions with respect to the tax
years 1992 and 1993, Rule 155 computations are necessary to
determine whether there is a substantial understatement of tax
for either year.
Furthermore, based on the record, we believe that
petitioners acted with reasonable cause and good faith with
respect to their conclusion that the costs of the comic books
were deductible as employee business expenses based on the
results of the examination of their prior years' returns in which
respondent allowed such costs. See Matthews v. Commissioner, 92
T.C. 351, 363 (1989), affd. 907 F.2d 1173 (D.C. Cir. 1990);
De Boer v. Commissioner, T.C. Memo. 1996-174. Therefore, the
penalty does not apply to the portion of the underpayment which
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