William R. and Betty O. Bass - Page 10

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          the greater of 10 percent of the tax required to be shown on the            
          return, or $5,000.  Sec. 6661(b)(1)(A).  Generally, the amount of           
          an understatement is reduced by the portion of the understatement           
          that the taxpayer shows is attributable to either (1) the tax               
          treatment of any item for which there was substantial authority,            
          or (2) the tax treatment of any items with respect to which the             
          relevant facts were adequately disclosed on the return.  Sec.               
          6661(b)(2)(B).  If an understatement is attributable to a tax               
          shelter item, however, different standards apply.  First, in                
          addition to showing the existence of substantial authority, a               
          taxpayer must show that he reasonably believed that the tax                 
          treatment claimed was more likely than not proper.  Sec.                    
          6661(b)(2)(C)(i)(II).  Second, disclosure, whether or not                   
          otherwise adequate, will not reduce the amount of the                       
          understatement.  Sec. 6661(b)(2)(C)(i)(I).                                  
               Substantial authority exists when “the weight of the                   
          authorities supporting the treatment is substantial in relation             
          to the weight of authorities supporting contrary positions.”                
          Sec. 1.6661-3(b)(1), Income Tax Regs.  Petitioner has failed to             
          show that substantial authority existed for the tax treatment of            
          the Cal-Neva loss on his 1982 return.                                       
               Petitioner has not satisfied any of the conditions for                 
          avoiding application of the section 6661 addition to tax.  His              
          inclusion of the loss on Schedule C without identification of the           

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