Gerald A. Sadler - Page 7




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          1989 amended return, petitioner reported $41,852.64 as his tax              
          liability for 1989; and (3) on the 1990 return, petitioner                  
          reported $5,725 as his tax liability for 1990.  Petitioner argues           
          that, because he showed the correct amount of tax imposed under             
          subtitle A on his 1989 amended return and 1990 return, there is             
          no underpayment of tax in this case.                                        
               An "underpayment" is the amount by which the tax imposed               
          exceeds the excess of the sum of the amount shown as the tax by             
          the taxpayer on his return, plus amounts not so shown that were             
          previously assessed (or collected without assessment), over the             
          amount of rebates made.  See sec. 6664(a).  In making this                  
          computation, "the amount shown as the tax by the taxpayer on his            
          return" is reduced by the excess of:                                        
                    (i) The amounts shown by the taxpayer on his                      
               return as credits for tax withheld under section 31                    
               (relating to tax withheld on wages) * * * over                         
                    (ii) The amounts actually withheld, * * * with                    
               respect to a taxable year before the return is filed                   
               for such taxable year.  [Sec. 1.6664-2(c)(1)(i) and                    
               (ii), Income Tax Regs.]                                                
               Section 1.6664-2, Income Tax Regs.,4 takes into                        
          consideration the situation in which a taxpayer overstates the              


               4  We note that while the regulation was not issued until              
          after petitioner filed the tax returns at issue in the case at              
          bar, it does govern the definition of an underpayment with                  
          respect to respondent's penalty determination herein as secs.               
          1.6664-1 through 1.6664-4, Income Tax Regs., apply to returns,              
          the due date of which is after Dec. 31, 1989.  See sec. 7805(b);            
          Rice v. Commissioner, T.C. Memo. 1999-65; sec. 1.6664-1(b),                 
          Income Tax Regs.                                                            




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