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understatement attributable to a substantial understatement. A
substantial understatement means an understatement which exceeds
the greater of 10 percent of the tax required to be shown on the
return or $5,000. Sec. 6662(d)(1). The understatement is reduced
by that portion of the understatement for which the taxpayer had
substantial authority or for which the taxpayer adequately
disclosed the relevant facts in the return. Sec. 6662(d)(2)(B).
Additionally, no penalty is imposed with respect to any portion of
an understatement as to which the taxpayer acted with reasonable
cause and in good faith. Sec. 6664(c)(1). Section 1.6664-4(b),
Income Tax Regs., provides that reliance on professional advice
constitutes reasonable cause and good faith if, under all the
circumstances, the reliance was reasonable and the taxpayer acted
in good faith. The taxpayer, however, must disclose to the adviser
all relevant facts regarding the proper tax treatment of an item in
order to be able to invoke the professional reliance exception.
Although petitioner retained the services of a tax return
preparer, it did not disclose the relevant facts to the preparer.
Accordingly, petitioner is liable for the section 6662(a) accuracy-
related penalty with regard to the items it conceded.
To reflect the foregoing and petitioner's concessions,
Decision will be
entered under Rule 155.
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Last modified: May 25, 2011