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likely than not proper. Sec. 6661(b)(2)(C)(i)(II). Second,
disclosure, whether or not adequate, will not reduce the amount
of the understatement. Sec. 6661(b)(2)(C)(i)(I).5
The understatement of tax of $15,285 on petitioners’ return
is greater than $5,000 and is greater than 10 percent of the tax
required to be shown on the return. Consequently, it is a
substantial understatement of tax. Sec. 6661(b)(1)(A).
Petitioners concede (and we likewise find) that they neither had
substantial authority nor made adequate disclosure with respect
to claiming the Arid Land loss as a deduction. Petitioners’ sole
argument is that they acted with reasonable cause and in good
faith in claiming the loss.
Section 6661(c) provides the Secretary with the discretion
to waive the section 6661(a) addition to tax if the taxpayer
shows he acted with reasonable cause and in good faith.
Generally, we review the Secretary’s failure to waive the
addition to tax for abuse of discretion. Martin Ice Cream Co. v.
Commissioner, 110 T.C. 189, 234-235 (1998). Nothing in the
record indicates petitioner requested a waiver for good faith and
reasonable cause under section 6661(c). In the absence of such a
request, we cannot review respondent’s determination for an abuse
of discretion. See id. We nevertheless point out that, for the
5As a result of petitioners’ concessions and our findings,
discussed below, we need not decide whether the tax shelter
provisions are applicable in this case.
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