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disclosed in the return or in a statement attached to the
return”, and (2) “there is a reasonable basis for the tax
treatment of such item by the taxpayer.” Sec. 6662(d)(2)(B).
Where a taxpayer can show there is reasonable cause for any
portion of the underpayment and that the taxpayer acted in good
faith with respect to that portion of the underpayment, then no
penalty shall be imposed under section 6662(a) with respect to
that portion of the underpayment. Sec. 6664(c).
Petitioner failed to report her correct income from Miroyal,
National Land Bank, or Nature’s Herbs & Tea Garden for 1999 and
2000. She had a substantial understatement of tax for 1999 and
2000. The understatement amount exceeds $5,000 per year and 10
percent of the amount required to be shown on the return.
Petitioner did not offer any substantial authority or reasonable
cause for failing to report her correct income; thus, she is
liable for a penalty under section 6662 for 1999 and 2000.
Respondent is sustained on this issue.18
B. Section 6673
Section 6673 allows this Court to award a penalty to the
United States in an amount not in excess of $25,000 for
18 The Court need not determine whether petitioner was
negligent in failing to report her income for 1999 and 2000
because there was a substantial understatement on her 1999 and
2000 returns.
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