Kenneth and Dorothy Hitchen - Page 26

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          6661 addition to tax if the taxpayer shows that he had reasonable           
          cause for the understatement and that he acted in good faith.               
          Sec. 6661(c).                                                               
               The section 6661(a) addition to tax is not imposed on any              
          portion of a substantial understatement with respect to which an            
          addition to tax under section 6659 is imposed.  Sec. 6661(b)(3).            
          If a substantial understatement exists in a taxable year, and the           
          section 6659(a) addition to tax is imposed only with respect to a           
          portion of that substantial understatement, then the section                
          6661(a) addition to tax is imposed with respect to the remainder            
          of the understatement.  Sec. 1.6661-2(f)(1), Income Tax Regs.               
               As discussed above in connection with the negligence                   
          additions to tax, petitioners did not understand the partnership            
          and farming losses and the general business credits, yet they did           
          not seek advice concerning these items.  We conclude that                   
          petitioners have not shown that they had substantial authority,             
          or that they acted with reasonable cause and in good faith with             
          respect to any portion of the understatements in each of the                
          relevant years.  It is also evident from the record that                    
          petitioners did not disclose the relevant facts concerning the              
          losses and credits.  In the absence of substantial authority or             
          adequate disclosure, the amount of the understatement in each               
          year is not reduced pursuant to section 6661(b)(2)(B) and,                  

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