- 39 -
503 (1988). Section 6662(a) provides for a 20-percent addition
to tax for tax years with return due dates after December 31,
1989.13
Petitioner bears the burden of showing that respondent’s
imposition of these additions to tax is erroneous. Rule 142(a);
Tweeddale v. Commissioner, 92 T.C. 501, 506 (1989). Section 7491
is not applicable in this case because the audit of petitioner’s
returns began before July 22, 1998.
An understatement is “substantial” if the amount of the
understatement for the applicable year exceeds the greater of 10
percent of the tax required to be shown on the return or $5,000.
Sec. 6661(b)(1)(A). Under section 6661, an “understatement” is
defined as the excess of the tax required to be shown on the
return over the amount of tax that is shown on the return reduced
by any rebate within the meaning of section 6211(b)(2). Sec.
6661(b)(2)(A).
The amount of the understatement is reduced by the portion
of the understatement attributable to the tax treatment of any
item if there is or was substantial authority for the treatment,
or if there was adequate disclosure of the relevant facts
13 Because the sec. 6662 penalty applies to negligence and
substantial understatements, and we have found that petitioner
was negligent with respect to all improperly reported items, we
need not discuss sec. 6662 any further.
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