William J. Fleischaker and Donni L. Fleischaker - Page 26

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          1991 and 1992.  Section 6662(a) and (b)(2) imposes a penalty                 
          equal to 20 percent of the portion of an underpayment of income              
          tax attributable to any substantial understatement of tax.  A                
          substantial understatement occurs when the amount of the                     
          understatement exceeds the greater of 10 percent of the amount of            
          tax required to be shown on the return or $5,000 ($10,000 for                
          corporations).  See sec. 6662(d)(1).  The amount of an                       
          understatement against which the penalty is imposed will be                  
          reduced by the portion of the understatement that is attributable            
          to the tax treatment of an item (1) that was supported by                    
          "substantial authority" or (2) for which the relevant facts were             
          "adequately disclosed in the return or in a statement attached to            
          the return."  Sec. 6662(d)(2)(B).  Additionally, no penalty will             
          be imposed with respect to any portion of an underpayment if it              
          is shown that there was a reasonable cause for such portion and              
          the taxpayer acted in good faith with respect to such portion.               
          See  sec. 6664(c)(1).                                                        
               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.  See 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.  See id.  For this                  

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