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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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