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and records. We find that petitioner accurately reported its
1991 gross sales.
Section 6662 Penalty
Section 6662(a) imposes a penalty of 20 percent of the
portion of an underpayment attributable to one or more of the
items set forth in section 6662(b), including negligence or
disregard of rules or regulations. See sec. 6662(b)(1).
Negligence is defined as the lack of due care or failure to do
what a reasonable and ordinarily prudent person would do under
the circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). A section 6662 accuracy-related penalty does not apply
with respect to any portion of an underpayment if reasonable
cause exists for the underpayment and the taxpayer acted in good
faith with respect to such portion. Sec. 6664(c)(1). The
determination of whether a taxpayer acted with reasonable cause
and in good faith depends upon the pertinent facts and
circumstances of the case. Sec. 1.6664-4(b)(1), Income Tax Regs.
Petitioner bears the burden of proving that the penalty does not
apply. Rule 142(a); Luman v. Commissioner, 79 T.C. 846, 860-861
(1982).
We find that petitioner paid royalties to DM significantly
in excess of the value of the licensed assets. These payments,
which were a substantial portion of petitioner's profits, were
made to a closely related company. The people in control of
petitioner and DM were similarly motivated to promote Buddhist
teachings. Petitioner paid its profits to DM as royalties rather
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