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provides that, if there is a substantial understatement of income
tax for any taxable year, an amount equal to 25 percent of the
underpayment attributable to such understatement must be added to
the tax. For purposes of section 6661, there is a substantial
understatement of income tax if the amount of the understatement
exceeds the greater of 10 percent of the tax required to be shown
on the return for the taxable year in issue or $5,000. See sec.
6661(b)(1)(A).
In cases not involving tax shelters, the addition to tax
under section 6661 is mandatory if there is a substantial
understatement of income tax as defined by section 6661(b)(1)
unless, and to the extent that, the taxpayer has substantial
authority for the tax treatment of the disputed item or the
relevant facts affecting the tax treatment of the disputed item
are adequately disclosed within the meaning of section
6661(b)(2)(B)(ii). See sec. 6661(b)(2)(B).
Although petitioners attempted to show that certain case law
supported their positions, petitioners failed to research or
analyze their obligation to file consistently with prior returns.
In addition, they failed to introduce any evidence showing that
they or their return preparer did any investigation of
petitioners’ tax reporting obligations prior to filing their 1988
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