Sheila Mae Howard - Page 20

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          that there was, we continue with our discussion of the accuracy-            
          related penalty.                                                            
               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).  Further, no             
          penalty shall be imposed if it is shown that there was a                    
          reasonable cause for the underpayment and the taxpayer acted in             
          good faith with respect to the underpayment.  Sec. 6664(c)(1).              

               Petitioner makes 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              
          us, we also conclude that petitioner failed to establish that               
          there was reasonable cause for any portion of the understatements           
          in this case or that she acted with the requisite good faith.               
          Accordingly, we hold that petitioner is liable for accuracy-                
          related penalties for 1996 and 1997 to the extent that the Rule             
          155 computation demonstrates an underpayment of tax in each of              
          those years.                                                                
               Reviewed and adopted as the report of the Small Tax Case               

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