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rules and regulations, or a substantial understatement of tax.
An understatement of tax is substantial if it exceeds either 10
percent of the tax required to be shown on the return, or $5,000.
Sec. 6662(d)(1)(A).
The above accuracy-related penalty, however, is not imposed
with respect to any portion of a taxpayer’s understatement of tax
for which the taxpayer acted with reasonable cause and in good
faith. Sec. 6664(c)(1).
In our discretion, and based on the facts before us, we
conclude that petitioners had reasonable cause in treating
petitioner’s airplane activity as a for profit activity.
Petitioners are not liable for the accuracy-related penalties
determined by respondent under section 6662 with respect to the
deficiencies at issue herein.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011