- 39 - petitioners from avoiding taxation on their interest income by assigning that income to another. Lucas v. Earl, 281 U.S. 111 (1930). Petitioners failed to present any evidence regarding the $35 of dividend income. Accordingly, we conclude that petitioners failed to report interest and dividend income on their 1992 joint return of $3,748 and $35, respectively. 3. Section 6662(a) Penalty Pursuant to section 6662(a), a taxpayer may be liable for a penalty of 20 percent of the portion of an underpayment of tax attributable to a substantial understatement of income tax or due to negligence or disregard of rules or regulations. Sec. 6662(b). The term “understatement” means the excess of the amount of tax required to be shown on a return over the amount of tax imposed which is shown on the return, reduced by any rebate (within the meaning of section 6211(b)(2)). Sec. 6662(d)(2)(A). Generally, an understatement is a “substantial understatement” when the understatement exceeds the greater of $5,000 or 10 percent of the amount of tax required to be shown on the return. Sec. 6662(d)(1)(A). The term “negligence” in section 6662(b)(1) includes any failure to make a reasonable attempt to comply with the Code. Sec. 6662(c).Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: March 27, 2008