Choice "D" is correct. If John relied on the opinion of a reputable accountant or attorney who prepared his return and furnished all relevant information, in general, he would have a reasonable basis for the tax return position and could avoid the penalties for understatement of tax.
Choice "a" is incorrect. If John took a reasonable position on his tax return, he is subject to the penalty for understatement of tax and not to the penalty for substantial understatement of tax (both would not be applied at the same time). The exact penalty that would apply would depend on the amount of the understatement of tax.
Choice "c" is incorrect. If there was a reasonable basis for a disclosed tax position on the tax return, and John acted in good faith, the penalty for understatement of tax would not apply if John actually did understate his tax. He would still be liable for the unpaid tax, and any interest, but he would not be liable for the penalty.
Choice "b" is incorrect. If John's understatement of tax is a substantial understatement, the penalty is the same percentage as for a simple understatement.