Opinion ID: 577526
Heading Depth: 3
Heading Rank: 2

Heading: Substantial Understatement of Liability

Text: 33 The Tax Court upheld the imposition of an addition to the tax under § 6661 because taxpayers substantially underpaid their taxes. 4 The Tax Court found that the transactions at issue in this case were tax shelters because they were tax-motivated, sham transactions. See § 6661(b)(2)(C). For the reasons outlined in Part I of this decision, we uphold this finding by the Tax Court. Therefore, to avoid the substantial understatement penalty, taxpayers must show that there was substantial authority that led the taxpayers to reasonably believe that the tax treatment submitted was more likely than not the proper treatment. § 6661(b)(2)(C). 34 Taxpayers cannot make such a showing. Substantial authority is found  'only if the weight of the authorities supporting the treatment is substantial in relation to the weight of authorities supporting contrary positions.'  Antonides v. Commissioner, 893 F.2d 656, 659 (4th Cir.1990) (quoting Treas.Reg. § 1.6661-3(b)(1)). Taxpayers assert that they relied on the legal opinion in the sales material. That opinion, however, did not adequately address the sham transaction issue. We agree with the Tax Court that taxpayers have not offered substantial authority to support the investment in The Barbados Partnerships as having genuine economic substance. Nor have we found any authority ourselves that would support such a position. We uphold the Tax Court's finding of substantial understatement.