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Accordingly, respondent's showing that a portion of the
underpayment is attributable to fraud based on the application of
the doctrine of collateral estoppel leads to the conclusion that
the entire underpayment is attributable to fraud pursuant to
section 6653(b) as a matter of law, in light of petitioner’s
failure to raise a triable issue of fact whether a portion of the
underpayment is not attributable to fraud.
Issue 3. Substantial Understatement of Tax
The final issue for decision is whether petitioner is liable
for the addition to tax under section 6661. For assessments made
after October 21, 1986, section 6661(a) provides for an addition
to tax equal to 25 percent of the amount of any underpayment
attributable to a substantial understatement of tax. See Omnibus
Budget Reconciliation Act of 1986, Pub. L. 99-509, sec. 8002(a),
100 Stat. 1951. An understatement is substantial if it exceeds
the greater of $5,000 or 10 percent of the tax required to be
shown on the return. See sec. 6661(b). The amount of the
understatement may be reduced under section 6661(b)(2)(B) for
amounts adequately disclosed or supported by substantial
authority.
Petitioner reported income tax liability in the amount of
“zero”. We have found petitioner liable for taxes in the amount
of $14,611 for 1986. Petitioner understated his income taxes by
$14,611. See sec. 6661(b)(2). The understatement exceeds both
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