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D. Whether Petitioner Is Liable for the Accuracy-Related
Penalty under Section 6662(a)
Respondent determined and contends that petitioner is liable
for the accuracy-related penalty for substantial understatement
of income tax for 1993 and 1994 under section 6662(a).
Petitioner contends that respondent is estopped from
asserting the accuracy-related penalty under section 6662(a)
because respondent conceded at trial that negligence is not an
issue in this case. We disagree.
Respondent contends that the accuracy-related penalty
applies because there is a substantial understatement of tax, not
because of negligence. See sec. 6662(b)(2). Section 6662(b)(2)
imposes a 20-percent penalty on the portion of an underpayment
attributable to a substantial understatement. A substantial
understatement exists if, for any taxable year, 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
$5,000. See sec. 6662(d)(1)(A).
If the taxpayer has substantial authority for his or her tax
treatment of any item on the return, the understatement is
reduced accordingly. See sec. 6662(d)(2)(B)(i). Petitioner
cited no authority for his position that he may carry forward net
operating losses from 1991 and 1993 to 1994 when he made no
election under section 172(b)(3) and when he did not establish
that he had losses that he could carry forward from 1991 and 1993
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