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the understatement is the full amount of the tax imposed. Mosher
v. Commissioner, 927 F.2d 599 (5th Cir. 1991), affg. without
published opinion T.C. Memo. 1989-157; Hesselink v. Commissioner,
97 T.C. 94 (1991); sec. 1.6661-2(d)(2), Income Tax Regs. An
understatement is substantial if it exceeds the greater of 10
percent of the amount of tax required to be shown or $5,000.
Sec. 6661(b)(1)(A). The underpayment for purposes of section
6661 is determined by subtracting from the understatement any
withholding credits to which the taxpayer is entitled. Woods v.
Commissioner, 91 T.C. 88, 92-99 (1988). In petitioner's case, no
withholding credits apply, there is an underpayment equivalent to
the understatement, and the understatement is substantial for
each taxable year. For 1986, the underpayment and understatement
equal the amount of tax imposed less the $199 liability reported;
for 1987 the underpayment and understatement equal the full
amount of the tax imposed.4
Petitioner offered no evidence or explanations on brief for
his failure to file timely income tax returns for 1986 and 1987,
for his failure to report income and deductions accurately, or
4Consistent with her treatment of the Form 1040 for 1987 as
a valid return, respondent granted petitioner credit for $98
shown as tax on the form in computing the understatement. As
explained above, such treatment is more favorable than is
warranted under established law. However, the benefit conferred
by this treatment amounts to less than $25 ($98 x 25%, the
applicable rate for additions to tax assessed after Oct. 21,
1986. Pallottini v. Commissioner, 90 T.C. 498 (1988)).
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