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Section 6662(a) imposes an accuracy-related penalty equal to
20 percent of the tax resulting from a substantial understatement
of income tax. An understatement is substantial in the case of a
corporation if the amount of the understatement for the taxable
year exceeds the greater of 10 percent of the tax required to be
shown in the tax return for that year or $10,000. See sec.
6662(d)(1)(A) and (B). An understatement is equal to the excess
of the amount of tax required to be shown in the tax return over
the amount of tax shown in such return. See sec. 6662(d)(2)(A).
The amount of the understatement is reduced to the extent
that it is attributable to, inter alia, an item for which there
is or was substantial authority. See sec. 6662(d)(2)(B)(i). In
order to satisfy the substantial authority standard of section
6662(d)(2)(B)(i), petitioner must show that the weight of author-
ities supporting its position is substantial in relation to those
supporting a contrary position. See Antonides v. Commissioner,
91 T.C. 686, 702 (1988), affd. 893 F.2d 656 (4th Cir. 1990); sec.
1.6662-4(d)(3)(i), Income Tax Regs. The substantial authority
standard is not so stringent that a taxpayer’s treatment must be
one that is ultimately upheld in litigation or that has a greater
than 50-percent likelihood of being sustained in litigation. See
sec. 1.6662-4(d)(2), Income Tax Regs. A taxpayer may have
substantial authority for a position even where it is supported
only by a well-reasoned construction of the pertinent statutory
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Last modified: May 25, 2011