- 12 - No credible evidence refutes the income character of the $151,000. Haas received the additional 8.26-percent stock interest in DP that was valued at $151,000 and treated as nonemployee compensation. Haas agreed to report and did report the $151,000 on his and his wife’s 1993 joint Federal income tax return as taxable income. Petitioners have not provided adequate evidence to support the recharacterization of the $151,000 as nontaxable income. Under section 6662(a), a penalty is imposed equal to 20 percent of the portion of the underpayment that is attributable to a substantial understatement of income tax (namely, an understatement for a year in excess of 10 percent of the amount required to be shown on the Federal income tax return or $5,000). See sec. 6662(d)(1). However, if the taxpayer has substantial authority for the tax return position, the penalty does not apply. See sec. 6662(d)(2)(B)(i). We have disallowed the $63,500 claimed deduction relating to consulting services primarily on grounds of petitioners’ burden of proof. We believe that petitioners, on the limited facts in evidence relating to this issue, had a reasonable basis for claiming a current ordinary deduction for the $63,500 relating to the consulting services. We do not sustain the section 6662(a) penalty.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011