Chad A. and Katherine J. Lincoln - Page 11

                                       - 11 -                                         

          expenses resulted in a $55,814 understatement of income tax.                
          This amount is in excess of $5,000 and exceeds 10 percent of the            
          amount of tax required to be shown on the return.                           
               Any understatement is reduced to the extent that it is                 
          attributable to an item that was adequately disclosed and has a             
          reasonable basis, or for which there was substantial authority              
          for its tax treatment.  Sec. 6662(d)(2)(B).  Petitioners did not            
          make adequate disclosure, since they did not disclose on their              
          return or on a statement attached to the return the relevant                
          facts affecting the tax treatment of the sale of the Pacific                
          Grove property or of the reallocated items claimed on Schedule E.           
          See sec. 6662(d)(2)(B)(ii)(I).                                              
               The remaining question is whether there was substantial                
          authority for the tax treatment petitioners claimed.  Substantial           
          authority exists when the weight of authority supporting the                
          treatment of an item is substantial as compared to the weight of            
          authority for the contrary treatment.  Sec. 1.6662-4(d)(3)(i),              
          Income Tax Regs.  In determining whether there is substantial               
          authority, all authorities relevant to the tax treatment of an              
          item, including those authorities pointing to a contrary result,            
          are taken into account.  Id.  For this purpose, authorities                 
          include statutory and regulatory provisions, legislative history,           
          administrative interpretations of the Commissioner, and court               
          decisions, but not conclusions reached in treatises or legal                

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011