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respondent's determination and hold that the Kanters are liable
for the addition to tax under section 6659 equal to 30 percent of
the underpayment attributable to the GLS Associates adjustment.
Issue 35. Whether Kanter Is Liable for Section 6661 Additions to
Tax for 1982 Through 1984, and 1986 Through 1988
OPINION
Section 6661(a) provides that, if there is a substantial
understatement of income tax for any year, there will be added to
the tax an amount equal to 25 percent of the amount of any
underpayment attributable to such understatement. See Pallottini
v. Commissioner, 90 T.C. 498 (1988). For purposes of this
section, a substantial understatement exists if the amount of the
understatement for the taxable year exceeds the greater of 10
percent of the tax required to be shown on the return or $5,000.
See sec. 6661(b)(1).
The term “understatement” means the excess of the tax
required to be shown on the return over the amount of tax imposed
which is shown on the return. Sec. 6661(b)(2)(A). The amount of
the understatement is reduced by that portion of the
(...continued)
However, as the Court further noted in Becker, to the extent that
the Court of Appeals for the Fifth Circuit's reversal in Heasley
may be read as based on a concept that, where an underpayment
derives from a lack of economic substance, the underpayment
cannot be attributable to an overvaluation, this Court, the Court
of Appeals for the Second Circuit, and other Courts of Appeals
have disagreed with the Fifth Circuit. See Gilman v.
Commissioner, supra.
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