Michael J. Heckler, a.k.a. Michael Vonheckler and Charlotte A. Miska - Page 8

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          issue, petitioners' understatement was substantial within the               
          meaning of section 6661(b)(1)(A).                                           
               The amount of the understatement may be reduced by that                
          portion of the understatement which is attributable to either:              
          (1) The tax treatment of any item by the taxpayer if there is or            
          was substantial authority for such treatment; or (2) any item               
          with respect to which the relevant facts affecting the item's tax           
          treatment are adequately disclosed in the return or in a                    
          statement attached to the return.  Sec. 6661(b)(2)(B).  However,            
          if the understated item is attributed to a "tax shelter", within            
          the meaning of section 6661(b)(2)(C)(ii), a reduction in the                
          understatement is not permitted unless the tax treatment of the             
          item used is supported by substantial authority and the taxpayer            
          believed that the tax treatment of such item was more likely than           
          not the proper tax treatment.  Sec. 6661(b)(2)(C)(i)(II).                   
               We conclude that Irving & Co. was a tax shelter within the             
          meaning of section 6661(b)(2)(C)(ii).  Therefore, even if                   
          petitioner adequately disclosed the nature of the understated               
          items on their return, which they did not do, they could not have           
          avoided the addition for substantial understatement.  Sec.                  
          6661(b)(2)(C)(i)(I).                                                        
               The question now is whether petitioners have substantial               
          authority for their treatment of the items in question and did              







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