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resulted from the accountant's mistake. Therefore, we find that
petitioner's reliance on West does not protect it from an
addition to tax under section 6661.
Given these considerations, we find that respondent did not
abuse her discretion by not waiving the addition to tax. No
reasonable cause existed for the understatement despite West's
purported reliance on the prior audit and petitioner's purported
reliance on West. Regardless, petitioner failed to request that
respondent waive the addition to tax. We hold petitioner liable
for an addition to tax under section 6661 for taxable year ended
July 31, 1989.
Accuracy-related Penalty Under Section 6662
Respondent determined an accuracy-related penalty of
$28,170 under section 6662(a) for taxable year ended July 31,
1990. Section 6662(a) imposes a penalty in an amount equal to
20 percent of the portion of the underpayment of tax
attributable to (1) negligence or disregard of the rules or
regulations or (2) any substantial understatement of income tax.
Sec. 6662(b)(1) and (2). The definition and the calculation of
a substantial understatement under section 6662(d) are similar
in most respects to section 6661. The section 6662(a) penalty
does not apply to any portion of an underpayment for which
reasonable cause exists and the taxpayer acted in good faith.
Sec. 6664(c)(1). The taxpayer bears the burden of proving that
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