- 18 -
Memo. 1999-315; Butler v. Commissioner, T.C. Memo. 1998-355;
sec. 1.152-1(b), Income Tax Regs.
Although petitioner identified Carl as her son on her 1998
return, she is not related to him by blood or marriage, nor did
she adopt him. Carl did not live with petitioner during all, nor
even the majority, of 1998. Accordingly, we sustain respondent’s
determination that petitioner is not entitled to claim a
dependency exemption for Carl for 1998.
E. Section 6662(a)9
The last issue for decision is whether petitioner is liable
for accuracy-related penalties pursuant to section 6662(a) for
1996 and 1997. 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). As this threshold computation is
dependent on our previous conclusions, we leave for the parties
to determine as part of the Rule 155 computation whether there
was a substantial understatement for 1996 and/or 1997. Assuming
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)(2). Sec. 7491(c); Rule 142(a); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
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