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In general then, section 86(a)(1) provides that gross income
includes the lesser of: (1) One-half of the Social Security
benefits received during the year; or (2) one-half of the excess
of the sum of (a) modified adjusted gross income plus (b) one-
half of the Social Security benefits, over the base amount. The
includable percentage is increased, however, if modified adjusted
gross income plus one-half of the Social Security benefits
exceeds an adjusted base amount of, for a joint return, $44,000.
See sec. 86(a)(2), (c)(2)(B). Accordingly, petitioners are
subject to the greater inclusion, which, on these facts, would be
calculated at 85 percent of the Social Security benefits
received. See sec. 86(a)(2). We therefore sustain respondent’s
determination that $2,907, 85 percent of the stipulated $3,420 in
Social Security benefits, must be included in petitioners’ gross
income for 1996.
III. Accuracy-Related Penalty
Subsection (a) of section 6662 imposes an accuracy-related
penalty in the amount of 20 percent of any underpayment that is
attributable to causes specified in subsection (b). Among the
causes so enumerated is any substantial understatement of income
tax. See sec. 6662(b)(2). A “substantial understatement” is
defined in section 6662(d)(1) to exist where 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 or
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