- 49 - the proceeds from the sale of ACT’s assets on their individual Federal income tax returns. Summary For taxable years 1986, 1987, and 1988, petitioners are liable for the section 6653(b)(1) addition to tax solely as results from their fraudulent underreporting of the gas rebate payments. Issues 7 and 8. Additions to Tax for Substantial Understatement Respondent determined that the Morrises are liable for additions to tax pursuant to section 6661 for taxable years 1986 and 1987, and that Briggs is liable for section 6661 additions to tax for taxable years 1986, 1987, and 1988. Section 6661 imposes a 25-percent addition to tax on any underpayment attributable to a substantial understatement of income tax. A substantial understatement of tax is one that exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000. See sec. 6661(b)(1)(A). For this purpose, the amount of the understatement is to be reduced by the portion attributable to any item for which there was substantial authority or any item that was adequately disclosed. See sec. 6661(b)(2)(B). In addition, the Commissioner may waive all or part of a section 6661 addition to tax upon a showing by the taxpayer that there was reasonable cause for the understatement and that the taxpayer acted in good faith. See sec. 6661(c).Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Next
Last modified: May 25, 2011