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an actual and honest objective of making a profit within the
meaning of section 183.
II. Accuracy-Related Penalty for a Substantial Understatement
Respondent determined that petitioner is liable for the
accuracy-related penalty for 1992 and 1993 because there were
substantial understatements of income tax on petitioners' 1992
and 1993 Federal income tax returns. See sec. 6662(a) and
(b)(2). An "understatement" is the difference between the amount
of tax required to be shown on the return and the amount of tax
actually shown on the return. See sec. 6662(d)(2)(A). A
"substantial understatement" exists if the understatement exceeds
the greater of (1) 10 percent of the tax required to be shown on
the return for a taxable year, or (2) $5,000. See sec.
6662(d)(1). The understatement is reduced to the extent that the
taxpayer has (1) adequately disclosed his or her position or (2)
has substantial authority for the tax treatment of an item. See
sec. 6662(d)(2)(B). Petitioners have the burden of proving they
are not liable for the penalty. See Rule 142(a).
Petitioners make no arguments regarding the accuracy-related
penalty. Based on the record, we conclude that there was a
substantial understatement of income tax in each of the years in
issue, and respondent's determination is sustained.
To reflect the foregoing,
Decision will be entered
for respondent.
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Last modified: May 25, 2011