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IV. Accuracy-Related Penalties
Respondent determined that each petitioner is liable for an
accuracy-related penalty for each of the taxable years before
us.23 With respect to ECI, docket No. 19027-98, 1994 is the only
year in which the penalty is still at issue. We consider the
1994 and 1995 taxable years with respect to all the other
petitioners.
A. ECI, the Cordeses’ Children, CFC, and the Accuracy-
Related Penalty Due to a Substantial Understatement of
Income Tax
Respondent determined that all petitioners, save the
Cordeses, are liable for the accuracy-related penalty due to a
substantial understatement of income tax pursuant to sec. 6662(a)
and (b)(2). A substantial understatement is an understatement of
income tax for any taxable year which exceeds the greater of (a)
10 percent of the tax required to be shown on the return, or (b)
$5,000, in the case of an individual, or $10,000, in the case of
a corporation. Sec. 6662(d)(1). As this threshold computation
is dependent on our other, earlier, conclusions, we leave for the
Rule 155 computation whether there was a substantial
understatement and whether and to what extent an accuracy-related
23In docket No. 5508-99, respondent did not determine
petitioner Eddie Cordes, Inc., Successor by Merger with Cordes
Finance Corp., was liable for the accuracy-related penalty
pursuant to sec. 6662(a) for 1994. Respondent so determined
because the items which were not attributable to fraud did not
give rise, on their own, to a deficiency to which an accuracy-
related penalty could attach. Respondent did determine, however,
that should we find petitioner not liable for the fraud penalty
pursuant to sec. 6663, petitioner is liable for the accuracy-
related penalty pursuant to sec. 6662(a).
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