- 22 -
Issue 2. Accuracy-Related Penalty Under Section 6662
Respondent determined that petitioners are liable for
accuracy-related penalties pursuant to section 6662 of $1,334,
$1,937, and $2,004 for 1992, 1993, and 1994, respectively.
Respondent asserts that the section 6662(a) penalty in each year
is due to a substantial understatement of tax. See sec.
6662(b)(2). Petitioners assert that they are not liable for the
section 6662(a) penalty, because they reported all of their
income and the correct amount of tax for each of the years at
issue.
Section 6662(a) imposes a penalty in an amount equal to 20
percent of the portion of the underpayment of tax attributable to
one or more of the items set forth in subsection (b). Section
6662(b)(2) provides that section 6662 shall apply to any portion
of the underpayment attributable to any substantial
understatement of income tax. There is a substantial
understatement of income tax if the amount of the understatement
for the taxable year exceeds the greater of (1) 10 percent of the
tax required to be shown on the return, or (2) $5,000. Sec.
6662(d)(1)(A). For purposes of section 6662(d)(1),
"understatement" is defined as the excess of tax required to be
shown on the return over the amount of tax that is shown on the
return reduced by any rebate. Sec. 6662(d)(2)(A).
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011