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Thus, petitioner’s admitted understatement of $17,939 greatly
exceeded both 10 percent of the proper tax due4 and $5,000. The
understatement thus constitutes a “substantial understatement”.5
Petitioner’s tax return for 1992 showed tax due of $596.
Respondent’s accuracy-related penalty for 1992 was attributable
solely to the negligence provision of section 6662(b)(1).6
Petitioner has introduced no evidence to dispute
respondent’s determination that petitioner’s 1991 understatement
was “substantial” within the meaning of the statute, or that
petitioner was negligent in connection with his 1992
understatement. However, petitioner argues that no accuracy-
related penalty should be imposed under section 6664(c)(1), which
provides:
No penalty shall be imposed under this part with
respect to any portion of an underpayment if it is
shown that there was a reasonable cause for such
portion and that the taxpayer acted in good faith
with respect to such portion.
4The proper tax due consists of the $17,939 understatement
plus the $468 in tax shown on 1991 return, for a total of
$18,407. The understatement represents more than 97 percent of
the proper tax due.
5Respondent did not assert in the notice of deficiency that
the 1991 penalty was also being imposed on the alternative
grounds of negligence.
6Petitioner’s admitted understatement of $1,395 for 1992
represents more than 10 percent of the proper tax due. The
proper tax due consists of the $1,395 understatement plus the tax
shown on the return of $596, resulting in a proper tax due of
$1,991. The understatement thus represents more than 70 percent
of the proper tax due, but does not exceed $5,000.
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