- 9 -
B. Section 6662(a)9
The last issue for decision is whether petitioners are
liable for an accuracy-related penalty pursuant to section
6662(a) for the year in issue. As relevant herein, section
6662(a) imposes a penalty equal to 20-percent of any underpayment
of tax that is due to a substantial understatement of income.
See sec. 6662(a) and (b)(2). An individual substantially
understates his or her income tax when the reported tax is
understated by the greater of 10-percent of the tax required to
be shown on the return or $5,000. Sec. 6662(d)(1)(A). Tax is
not understated to the extent that the treatment of the item
related thereto is based on substantial authority or is
adequately disclosed in the return or in a statement attached to
the return and there is a reasonable basis for the tax treatment
of such item by the taxpayer. Sec. 6662(d)(2)(B). In addition,
no penalty shall be imposed if it is shown that there was
reasonable cause for the underpayment and the taxpayer acted in
good faith with respect to the underpayment. Sec. 6664(c)(1).
Petitioners make no argument with regard to substantial
authority or adequate disclosure, and we think that no such
argument can be persuasively made. Based on the record before
9 Respondent has satisfied his burden of production under
sec. 7491(c) with respect to the accuracy-related penalty under
sec. 6662(a) and (b)(1). Sec. 7491(c); Rule 142(a); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011