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Taking into account all of the facts and circumstances, it
would not be inequitable to hold petitioner liable for the
deficiencies here in dispute. Consequently, respondent’s
implicit denial of petitioner’s request for equitable relief
under section 6015(f) is not an abuse of discretion.
3. Section 6662(a) Penalty
For each year in issue, respondent determined that
petitioner is liable for a penalty under section 6662(a). That
section imposes an accuracy-related penalty if, among other
things, an underpayment of tax required to be shown on a return
is a substantial understatement of income tax. Sec. 6662(a) and
(b)(2).
In this case, the understatement of income tax for each
year in issue is computed in the same manner as and is equal to
the deficiency. See sec. 6662(d). We find that, for each year
in issue, the understatement of income tax is substantial within
the meaning of section 6662(d) because it exceeds the greater of
$5,000 or 10 percent of the tax required to be shown on the
return for the taxable year. Sec. 6662(d)(1)(A). Consequently,
the penalty imposed by section 6662(a) is applicable, and
respondent’s determination in this regard is sustained for both
years.
Reviewed and adopted as the report of the Small Tax Case
Division.
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