§7721

ubstantial understatement of tax and the accuracy-related penalty for substantial understatement of tax are not applicable to taxpayers filing tax returns prior to December 31, 1989. Omnibus Budget Reconciliation Act of 1989 (OBRA), Pub. L. 101-239, sec. 7721(a), 103 Stat. 2106, 2395. Thus, the reasonable cause exception does not apply to petitioners' 1986, 1987, and 1988 returns. In any case, Mrs. Zaban lacks reasonable cause and good faith for each of the years in issue. Mrs. Zaban never revie

ven above. Petitioners argue that section 6662 was first effective for tax years beginning after December 31, 1989. We disagree. Section 6662 applies to returns due after December 31, 1989. Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), 103 Stat. 2106, 2395. This includes petitioners' 1989 return. If a taxpayer has substantial authority for the tax treatment of any item on the return, the understatement is reduced by the amount attributable to it. Sec. 6661(b)(2)(B)(i)

nces sec. 6662(d), which section is the successor to sec. 6661 and is applicable for returns the due date for which (determined without regard to extensions) is after December 31, 1989. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c)(2), (d), 103 Stat. 2395-2400. After concessions by the parties,1 the issues for decision are as follows: (1) Whether petitioner William G. Kellen (petitioner) is liable for additions to tax under section 6653(a)(1) and (2) for negli

nces sec. 6662(d), which section is the successor to sec. 6661 and is applicable for returns the due date for which (determined without regard to extensions) is after December 31, 1989. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c)(2), (d), 103 Stat. 2395-2400. After a concession by petitioners,1 the issues for decision are as follows: (1) Whether petitioners are liable for additions to tax under section 6653(a)(1) and (2) for negligence or intentional disrega

ss to be “civil incidents of the assessment and collection of the income tax.” Mitchell, 303 U.S. at 405. In 1989 Congress combined the accuracy-related penalties into section 66628 and moved the fraud penalty into its own section 6663 under OBRA 89 § 7721, 103 Stat. at 2395. Congress wanted to “consolidate[] into one part of the Internal Revenue Code all of the generally applicable penalties relating to the accuracy of tax returns” including the “negligence penalty, the substantial understateme

table to the implicit overvaluation." Gilman v. Commissioner, 933 F.2d 143, 152 (2d Cir. 1991) (applying the since-repealed section 6659 penalty for valuation overstatements),4 4In the Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-239, sec. 7721, 103 Stat. at 2395-2400, Congress repealed former sec. 6659 and consolidated the various accuracy-related penalties into sec. 6662, carrying over the same essential language as sec. 6659. In the Omnibus Budget Reconciliation (continued...) -

made their proposal in 2013, they had requested that it be treated as an installment agreement "for purposes ofthe limitation on the late payment penalty in IRC § 6661(h)". (Because the Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-239, sec. 7721, 103 Stat. at 2395, repealed section 6661 and replaced it with the accuracy-relatedpenalty ofsection 6662, it is likely that petitioners had intended to refer to section 6651(h), which limits the penalty on an individual's failure to pay wh

mulgated shortly after Congress enacted a wholescale revision and reorganization ofthe accuracy-relatedpenalty regime ofsubchapter A ofchapter 68 ofthe Internal Revenue Code in 1989, see Omnibus Budget ReconciliationAct of 1989, Pub. L. No. 101-239, sec. 7721, 103 Stat. at 2395, and represented a deliberate policy determination that elements ofthe new penalty regime enacted in 1989 should apply to carryover years even when the original valuation misstatements had occurred in years before 1989, s

ation in Kersting tax shelter programs. "Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1), 100 Stat. 2744, and repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399. We will hereinafter refer to the provision as sec. 6621(c). - 24 - DeCastro decision documents incorporating the above-described settlement. McWade's transmittal letter stated that the decision documents in the Thompsons

tion in Kersting tax shelter programs. 14Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1), 100 Stat. 2744, and repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399. We will hereinafter refer to the provision as sec. 6621(c). - 24 - DeCastro decision documents incorporating the above-described settlement. McWade’s transmittal letter stated that the decision documents in the Thompsons

tion in Kersting tax shelter programs. 14Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1), 100 Stat. 2744, and repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399. We will hereinafter refer to the provision as sec. 6621(c). - 24 - DeCastro decision documents incorporating the above-described settlement. McWade’s transmittal letter stated that the decision documents in the Thompsons

tion in Kersting tax shelter programs. 14Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1), 100 Stat. 2744, and repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399. We will hereinafter refer to the provision as sec. 6621(c). - 24 - DeCastro decision documents incorporating the above-described settlement. McWade’s transmittal letter stated that the decision documents in the Thompsons

tion in Kersting tax shelter programs. 14Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1), 100 Stat. 2744, and repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399. We will hereinafter refer to the provision as sec. 6621(c). - 24 - DeCastro decision documents incorporating the above-described settlement. McWade’s transmittal letter stated that the decision documents in the Thompsons

1511(a), 100 Stat. 2744, subsec. (c) of sec. 6621 was designated subsec. (d). The additional interest applies only after Dec. 31, 1984. Sec. 6621(c) was repealed as of Dec. 31, 1989, by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399. 3 Respondent reserved relevancy objections to many of the exhibits attached to the stipulations of fact. Fed. R. Evid. 402 provides the general rule that all relevant evidence is admissible, while evidence which is not r

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of "Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ation of facts for evidentiary hearing on November 22, 2004; a third supplemental stipulation of 8Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1511(c)(1)(A)-(C), 100 Stat. 2744, and repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2399. - 12 - facts for evidentiary hearing on March 29, 2005; a fourth supplemental stipulation of facts, filed on June 17, 2005, and a stipulation of settled i

ner and Todd focused on the phrase “attributable to a valuation overstatement” in former section 6659(a), the precursor to section 6662(e) and (h).191 Pursuant to the holdings in those 191 In the Omnibus Reconciliation Act of 1989, Pub. L. 101- 239, sec. 7721, 103 Stat. 2395, Congress repealed former sec. (continued...) -272- cases, the portion of a tax underpayment that is attributable to a valuation overstatement is to be determined after taking into account any other proper adjustments to tax

in ¹¹References to sec. 6659 are to sec. 6659 as in effect with respect to returns that were filed after Dec. 31, 1981, and that were due before Jan. 1, 1990. See Economic Recovery Tax Act of 1981, Pub. L. 97-34, sec. 722(a), 95 Stat. 341; OBRA 1989 sec. 7721, 103 Stat. 2395. We note that, where a valuation overstatement on a return filed after Dec. 31, 1981, gives rise to an underpayment for a year prior to 1981 by operation of a carryback, then that underpayment is attributable to the overstat

ch spouse. 4The Tax Reform Act of 1986, Pub. L. 99-514, sec. 1503(a), 100 Stat. 2085, 2742, amended sec. 6653(b) to increase the addition to tax for fraud from 50 percent to 75 percent. The Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721, 103 Stat. 2395, removed the addition to tax for fraud from sec. 6653(b) and replaced it with sec. 6663. We note that petitioner’s 1989 Federal income tax was due after the effective date of sec. 6663(a), Dec. 31, 1989, and therefore all ca

only if 5References to sec. 6659 are to sec. 6659 as in effect with respect to returns that were filed after Dec. 31, 1981, and that were due before Jan. 1, 1990. See Economic Recovery Tax Act of 1981, Pub. L. 97-34, sec. 722(a), 95 Stat. 341; OBRA sec. 7721, 103 Stat. 2395. - 14 - an underpayment for a taxable year that is attributable to valuation overstatements is $1,000 or greater. Sec. 6659(d). The amount of the addition to tax varies depending upon the size of the discrepancy in the valua

only if 5References to sec. 6659 are to sec. 6659 as in effect with respect to returns that were filed after Dec. 31, 1981, and that were due before Jan. 1, 1990. See Economic Recovery Tax Act of 1981, Pub. L. 97-34, sec. 722(a), 95 Stat. 341; OBRA sec. 7721, 103 Stat. 2395. - 14 - an underpayment for a taxable year that is attributable to valuation overstatements is $1,000 or greater. Sec. 6659(d). The amount of the addition to tax varies depending upon the size of the discrepancy in the valua

5 F.2d 1005 (2d Cir. 1986). The Tax Reform Act of 1986, Pub. L. 99-514, sec. 1511(c), 100 Stat. 2744, redesignated and amended sec. 6621(d) as sec. 6621(c). Sec. 6621(c) was repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2399, effective for returns the due date for which is after Dec. 31, 1989. Current sec. 6621(c), which was enacted by the Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508, sec. 11341(a), 104 Stat. 1388-47Ò (effective

ax liabilities for 1982 through 1985; section 14Sec. 6653(b) was amended by the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 1015(b)(2)(B), 102 Stat. 3569, and the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(c)(1), 103 Stat. 2399. Sec. 6663(a) contains the current version of the fraud penalty. - 13 - 6653(b)(1)(A) and (B) applies to the 1986 and 1987 liabilities.15 “Fraud is established by proving that the taxpayer intended to evade tax believe

nces sec. 6662(d), which section is the successor to sec. 6661 and is applicable for returns the due date for which (determined without regard to extensions) is after December 31, 1989. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c)(2), (d), 103 Stat. 2395-2400. After concessions by the parties,2 the issues for decision are as follows: (1) Whether petitioner Raymond Wiest (petitioner) is liable for additions to tax under section 6653(a)(1) and (2) for 1(...cont

ods, of other unreported cash receipts, or (3) amounts paid by the corporation to petitioner, as constructive dividends. - 22 - changes in language, to section 6663 and termed a “penalty”. Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (d), 103 Stat. 2395, 2400 (“effective for returns the due date for which (determined without regard to extensions) is after 12/31/89”). Under both these provisions, respondent must prove by clear and convincing evidence that some portion

nces sec. 6662(d), which section is the successor to sec. 6661 and is applicable for returns the due date for which (determined without regard to extensions) is after December 31, 1989. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c)(2), (d), 103 Stat. 2395-2400. After concessions by the parties,2 the issues for decision are as follows: (1) Whether petitioner Raymond Wiest (petitioner) is liable for additions to tax under section 6653(a)(1) and (2) for 1(...cont

nder what was then (as to interest accruing after Dec. 31, 1984) section 6621(c)9, dealing with interest on a substantial underpayment attributable to a “tax-motivated transaction”. We found as facts in Cherin v. 9 Sec. 6621(c) later was repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2106, 2399. - 24 - Commissioner, 89 T.C. at 987, 988, 991, that the taxpayer (1) was looking for an investment which would produce significant income for his re

lying deficiency as proof that the taxpayer underpaid his tax. DiLeo v. Commissioner, supra. Fraud is established by showing that the taxpayer intended “to evade tax believed to be owing by conduct intended to 12Sec. 6663(a) was added to the Code by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), Pub. L. 101-239, 103 Stat. 2395-2398. Prior to the passage of OBRA 1989, the fraud penalty (or addition to tax, as it was then known) was contained in former sec. 6653(b). - 1

(b)(4), 102 Stat. 3342, 3569. Sec. 6663, the successor to sec. 6653(b)(1), is applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1989. Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c), (d), 103 Stat. 2106, 2395-2400. Sec. 6072(b) provides that a return of a corporation made on the basis of a fiscal year shall be filed on or before the 15th day of the third month following the close of the fiscal year. TECO’s 1988

lying deficiency as proof that the taxpayer underpaid his tax. DiLeo v. Commissioner, supra. Fraud is established by showing that the taxpayer intended "to evade tax believed to be owing by conduct intended to ¹²Sec. 6663(a) was added to the Code by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), ~Pub. L. 101-239, 103 Stat. 2395-2398. Prior to the passage of OBRA 1989, the fraud penalty (or addition to tax, as it was then known) was contained in former sec. 6653(b). -

(b)(4), 102 Stat. 3342, 3569. Sec. 6663, the successor to sec. 6653(b)(1), is applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1989. Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c), (d), 103 Stat. 2106, 2395-2400. Sec. 6072(b) provides that a return of a corporation made on the basis of a fiscal year shall be filed on or before the 15th day of the third month following the close of the fiscal year. TECO’s 1988

hes that some portion of the underpayment is attributable to fraud, the entire underpayment shall be treated as attributable to 2Former sec. 6653 was repealed and replaced by sec. 6663. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), 103 Stat. 2106, 2397. - 9 - fraud, except with respect to any portion of the underpayment which the taxpayer establishes is not attributable to fraud. Sec. 6663(b). The Commissioner will meet his burden of proof if it is shown that the

amount of $81,092. Respondent also assessed a negligence penalty in the amount of $4,055 and interest in the amount of $116,564.26 pursuant to section 6621(c) (subsequently repealed by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(b), 103 Stat. 2106, 2399). On April 15, 1991, because the bond was insufficient to offset the deficiency, interest, and penalty assessed, respondent mailed petitioners a Reminder of Unpaid Tax for the 1981 tax year. The reminder stated that

enalty on the deficiencies. To give effect to the foregoing, Decision will be entered under Rule 155. 8See supra note 6. 9The negligence accuracy-related penalty was formerly an addition to tax under former sec. 6653(a). The negligence provisions were revised and moved to sec. 6662 by the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(c)(1), 103 Stat. 2399.

the Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 144(a), 98 Stat. 494, 682. Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986, Pub. L. 99-514, sec. 1511(c) (1) (A)-(C), 100 Stat. 2085, 2744. Sec. 6621(c) was repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2106, 2399 effective with respect to returns the due date for which is after Dec. 31, 1989. - 10 - . which is a substantial underpayment attributable to tax mot

96 Stat. 324, 613, redesignated sec. 6660 as sec. 6662, applicable to returns the due date (determined without regard to extension) for filing of which was after Dec. 31, 1982. Lastly, the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (d), 103 Stat. 2395, 2399, redesignated sec. 6662 as sec. 6665, applicable to returns the due date (determined without regard to extension) for filing of which was after Dec. 31, 1989. - 8 - Respondent contends that no statutory deficie

aw, effective for returns with a due date after Dec. 31, 1989, no penalty may be imposed for understatements if the taxpayer shows that it had reasonable cause and acted in good faith. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), 103 Stat. 2398. - 51 - records were inadequate, partly because öf petitioners' practice of commingling funds and disregarding corporate formalities. We have determined that petitioners acted with fraudulent intent as regards the omitted

urisdiction and to strike the allegations in the petition pertaining to additions to tax on the ground that such items constituted affected items that could be resolved only at the 2 In the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721, 103 Stat. 2395, Congress consolidated the additions to tax for negligence and substantial understatement under new sec. 6662 entitled "Imposition of Accuracy-Related Penalty". Although respondent never amended sec. 301.6231(a)(5)- 1T(d), T

e returns for years prior to 1986. Petitioner did not file returns for 1986, 1987, 1988, and 1989, or any years thereafter. 5(...continued) . establishes is not attributable to fraud. 6See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101- 239, sec. 7721(c)(1) (deleting Code sec. 6653(b)), and sec. 7741(a) (inserting the new Code sec. 6651(f)). SEC. 6651(a). Addition to the Tax.--In case of failúre-- (1) to file any return required under authority of subchapter A of chapter 61 * * * there s

question of whether any part of the underpayment was due to the partner's negligence must be answered at the partner level. N.C.F. Energy Partners v. Commissioner, supra at 744-745. In the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721, 103 Stat. 2106, 2395-2397, Congress consolidated the additions to tax for negligence and substantial understatement under new section 6662 entitled "Imposition of Accuracy-Related Penalty". Although respondent never amended sec. 301.6231(a

7201 collaterally estops a taxpayer from denying fraud for purposes of former section 6653(b).3 See Blohm v. Commissioner, 994 F.2d 1542, 1554 (11th Cir. 1993), affg. T.C. Memo. 1991-636; Amos v. 3 The substance of sec. 6653(b), before amendment by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), Pub. L. 101-239, 103 Stat. 2106, 2395, now appears in secs. 6651(f) and 6663, which are effective generally for returns the due date of which is after Dec. 31, 1989. Before am

Section 6621(c) was repealed by section 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub.

Section 6621(c) was repealed by section 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub.

Re orm Act of 1986, Pub. L. 99-514, 100 Stat. 2085, 2744, and repeal d by sec. - 7721(b) of the Omnibus Budget .Reconciliation Act of 1989 (OBRA 89), Pub. L. 101-239, 103 Stat. 2106, 2399, effedtive for tax returns due after Dec. 31, 1989, OBRA 89 sec. 7721(d), 103 Stat. 2400. - 17 - Burton W. and Naomi R. Kanter: Docket No. Year 1350-87 1982 33557-87 1980 3456-88 11979 32103-88 1984 26251-90 1983, 1986 24002-91 1987 IOn brief, respondent concedes that the underpayment attributable to the disal

mputed by calculating the tax 4 Sec. 6661 was repealed in 1989, and the substantial understatement penalty was placed, along with the negligence penalty at issue herein, in a new sec. 6662. Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), (c)(2), 103 Stat. 2106, 2395, 2399. - 6 - owed on an amount arrived at by excluding the disclosed item and adding to the reported income those items to which the addition to tax would apply. The Court of Appeals for the Tenth Circuit ap

come Tax Regs. While we have held that petitioner has established, by the preponderance of the evidence, that it was not negligent for purposes 35 Under sec. 6664(c) of the current law, the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(a), 103 Stat. 2398, effective for returns with a due date after Dec. 31, 1989, the Commissioner no longer has this discretion, and no penalty may be imposed for understatements if the taxpayer can show that it had reasonable cause for the u

d) The later amendments of this provision by sec. 1503 of the Tax Reform Act of 1986 (Pub. L. 99-514, 100 Stat. 2085, 2742), by sec. 1015(b)(2)(B) of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. 100-647, 102 Stat. 3342, 3569), and by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89--Pub. L. 101-239, 103 Stat. 2106, 2395) do not affect the instant case. As a result of OBRA 89, the revised fraud addition to tax now appears in secs. 6663 and 6651(f). 25 SEC. 74

nd for the penalty under section 6662(a) with respect to petitioners' 1989 returns. We note that sections 6653 and 6661 were repealed effective for returns due after December 31, 1989. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(c)(1) and (2), 103 Stat. 2399. During 1987, section 6653(a)(1)(A) imposed an addition to tax equal to 5 percent of the underpayment of tax if any part of the underpayment was due to negligence or disregard of rules or regulations. Also durin

nd for the penalty under section 6662(a) with respect to petitioners' 1989 returns. We note that sections 6653 and 6661 were repealed effective for returns due after December 31, 1989. See Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(c)(1) and (2), 103 Stat. 2399. During 1987, section 6653(a)(1)(A) imposed an addition to tax equal to 5 percent of the underpayment of tax if any part of the underpayment was due to negligence or disregard of rules or regulations. Also durin

ter amendments of this provision by sec. 1503 of the Tax Reform Act of 1986 (TRA 86--Pub. L. 99-514, 100 Stat. 2085, 2742), by sec. 1015(b)(2)(B) of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. 100-647, 102 Stat. 3342, 3569), and by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89--Pub. L. 101-239, 103 Stat. 2106, 2395) do not affect the instant case. As a result of OBRA 89, the revised fraud addition to tax now appears in secs. 6663 and 6651(f). 12 SEC. 745

s the issue of whether petitioner was liable for an 3 Sec. 6661 was repealed applicable for returns the due date for which (determined without regard to extensions) is after Dec. 31, 1989. Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, sec. 7721(c)(2), 103 Stat. 2399. Petitioner’s 1989 fiscal year ended June 30, 1989; thus, its return was due (without regard to extensions) on Sept. 15, 1989. See sec. 6072(b). Therefore, sec. 6661 is applicable. -5- addition to tax pursuant to sectio

ficit Reduction Act of 1984, Pub. L. 98-369, sec. 144(a), 98 Stat. 494, 682. Sec. 6621(d) was redesignated sec. 6621(c) by the Tax Reform Act of 1986, Pub. L. 99-514, sec. 1511(c)(1)(A)- (C), 100 Stat. 2085, 2744. Former sec. 6621(c) was repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2106, 2399, effective with respect to returns the due date for which is after Dec. 31, 1989. - 19 - The question of the scope of this Court's jurisdiction under

Dec. 31, 1984, even though the transaction was entered into prior to the date of enactment of sec. 6621(c). Solowiejczyk v. Commissioner, 85 T.C. 552 (1985), affd. without published opinion 795 F.2d 1005 (2d Cir. 1986). Sec. 6621(c) was repealed by sec. 7721(b) of the Omnibus Budget Reconciliation Act of 1989, Pub. L. 101-239, 103 Stat. 2106, 2399, effective with respect to returns the due date for which is after Dec. 31, 1989. - 11 - reviewed in partnership level proceedings. N.C.F. Energy Part

F FACT AND OPINION NIMS, Judge: Respondent determined that the following deficiencies are due from petitioners: Additions to Tax Year Income Tax Sec. 6662(a)* 1989 $10,242 $2,048 1990 1,639 -0- 1991 2,972 594 *We note that in 1989, Pub. L. 101-239, sec. 7721(a), 103 Stat. 2395, 2400, as part of the amendments to subchapter A of chapter 68, repealed previous section 6662(a), which had provided for certain additions to tax. The repeal was effective for returns the due date for which (determined wi

2742, and apply to tax returns the due date of which is after Dec. 31, 1986. The later amendments of these provisions by sec. 1015(b)(2) of the Technical and Miscellaneous Revenue Act of 1988 (TAMRA 88)(Pub. L. 100-647, 102 Stat. 3342, 3569) and by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89--Pub. L. 101-239, 103 Stat. 2106, 2395) do not affect the instant cases. As the result of OBRA 89, the revised negligence addition to tax appears in sec. 6662, and the revised fra