- 41 -
sec. 6662(d)(2)(A). An understatement is substantial in the case
of an individual if the amount of the understatement for the
taxable year exceeds the greater of 10 percent of the tax re-
quired to be shown in the tax return for that year or $5,000.
Sec. 6662(d)(1)(A).
The amount of the understatement is to be reduced to the
extent that it is attributable to, inter alia, the tax treatment
of an item for which there is or was substantial authority. Sec.
6662(d)(2)(B)(i). The substantial authority standard is an
objective standard involving an analysis of the law and the
application of the law to the relevant facts. Sec. 1.6662-
4(d)(2), Income Tax Regs. In order to satisfy the substantial
authority standard of section 6662(d)(2)(B)(i), a taxpayer must
show that the weight of the authorities supporting the tax return
treatment of an item is substantial in relation to the weight of
authorities supporting contrary treatment. See Antonides v.
Commissioner, supra at 702; sec. 1.6662-4(d)(3)(i), Income Tax
Regs. The substantial authority standard is not so stringent
that a taxpayer’s treatment must be one that is ultimately upheld
in litigation or that has a greater than 50-percent likelihood of
being sustained in litigation. See sec. 1.6662-4(d)(2), Income
Tax Regs. A taxpayer may have substantial authority for a posi-
tion even where it is supported only by a well-reasoned construc-
tion of the pertinent statutory provision as applied to the
Page: Previous 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Next
Last modified: November 10, 2007