Did IRS send a CP-2000 that proposed tax and the 20% penalty for "substantial understatement" because the balance due was more than $5,000?  Did the amended return still show a balance due of more than $5,000?  The usual way to answer a CP-2000 is with a letter, not a 1040-X.  You can include a revised Schedule D as an attachment to the letter.  The letter should address the penalty issue.  Sounds to me like IRS is saying, "Nice try but you still owe the 20%."