Kenneth and Dorothy Hitchen - Page 28

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          for boarding fee expenses.  See sec. 1.6661-2(f)(1), Income Tax             
               Finally, we note that, as discussed above, only one section            
          6662(a) accuracy-related penalty may be applied with respect to             
          any given portion of an underpayment.  Sec. 1.6662-2(c), Income             
          Tax Regs.  Because we have already held that the entire                     
          deficiency in 1989 is subject to a section 6662(a) penalty, the             
          substantial understatement of income tax in 1989 does not                   
          increase petitioners’ liability for the section 6662(a) penalty             
          for that year.                                                              
          III. Tax Motivated Transactions                                             
               Section 6621(c) provides an increased rate of interest for             
          “any substantial underpayment attributable to tax motivated                 
          transactions”.  A “substantial underpayment attributable to tax             
          motivated transactions” is defined under section 6621(c)(2) as              
          “any underpayment of taxes imposed by subtitle A for any taxable            
          year which is attributable to 1 or more tax motivated                       
          transactions if the amount of the underpayment for such year so             
          attributable exceeds $1,000.”  A “tax motivated transaction” is             
          defined under section 6621(c)(3)(A) to include “any valuation               
          overstatement (within the meaning of section 6659(c))”, “any loss           
          disallowed by reason of section 465(a)”, and “any credit                    
          disallowed under section 46(c)(8)”.  Sec. 6621(c)(3)(A)(i) and              

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