Investment Research Associates - Page 548




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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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