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Respondent also determined that Harlan was liable for an
addition to tax pursuant to section 6654 for failure to pay
estimated tax. Section 6654 provides for an addition to tax in
the event of an underpayment of a required installment of
individual estimated tax. See sec. 6654(a). In general, each
required installment of estimated tax is equal to 25 percent of
the “required annual payment”, which in turn is equal to the
lesser of (i) 90 percent of the tax shown on the individual’s
return for that year (or, if no return is filed, 90 percent of
his or her tax for such year), or (ii) if the individual filed a
return for the immediately preceding taxable year, 100 percent of
the tax shown on that return. Sec. 6654(d)(1)(A) and (B). The
section 6654 addition to tax applies to an underpayment of a
required installment unless the taxpayer comes within one of the
exceptions provided in subsection (e) thereof. See Grosshandler
v. Commissioner, 75 T.C. 1, 20-21 (1980).
The parties have stipulated that Harlan did not file a
Federal income tax return for 1997 or 1998, and respondent has
shown that Harlan had sufficient income to incur Federal income
tax for 1998. See sec. 6654(d)(1)(B). In their brief,
petitioners respond to respondent’s argument that Harlan is
liable for a section 6654 addition to tax by claiming that Harlan
“had no taxable income”. We treat this response as a tacit
admission that Harlan did not pay any estimated tax in 1998. As
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