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addition to tax for negligence that respondent determined against
petitioner Carol DelVecchio. See sec. 6653(a)(2).
IV. Substantial Understatement of Income Tax Liability
For returns due before January 1, 1990, section 6661
provides for an addition to tax equal to 25 percent of the amount
of any underpayment attributable to a substantial understatement.
An understatement is “substantial” when the understatement for
the taxable year exceeds the greater of (1) 10 percent of the tax
required to be shown or (2) $5,000. The understatement is
reduced to the extent that the taxpayer has (1) adequately
disclosed his or her position, or (2) has substantial authority
for the tax treatment of an item. See sec. 6661; sec.
1.6661-6(a), Income Tax Regs.
Petitioners’ understatements for 1987 and 1988 exceed
10 percent of the tax required to be shown. They are, therefore,
substantial under section 6661.
Petitioners have cited no authority for their failure to
report the understatements of income for 1987 or 1988, nor did
they disclose any facts pertaining to such income on their
returns or in a statement attached to the returns. Therefore,
petitioners are liable for the section 6661 addition to tax.
Decision will be entered
under Rule 155.
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