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penalty under section 6662(a) does not apply to any part of an
underpayment if the taxpayer shows that there was reasonable
cause for that part of the underpayment and that the taxpayer
acted in good faith based on the facts and circumstances. Sec.
6664(c)(1). Failure to keep adequate records is evidence of
negligence. Marcello v. Commissioner, 380 F.2d 509, 511 (5th
Cir. 1967), affg. T.C. Memo. 1964-303; Magnon v. Commissioner, 73
T.C. 980, 1008-1009 (1980).
Petitioners bear the burden of proving that they were not
negligent. Rule 142(a). They did not do so. They did not show
that they had good faith or reasonable cause. Ms. Feltrinelli
concedes that her records were inadequate. Petitioners did not
show that they were not negligent.
Petitioners contend that they are not liable for the
accuracy-related penalty for negligence because they do not owe
taxes. We disagree for reasons stated above.
We conclude that petitioners are liable for the
accuracy-related penalty for negligence for 1989 and 1990 under
section 6662(a) and (c) and that each petitioner's understatement
for each year in issue is due to negligence.
To reflect concessions and the foregoing,
Decisions will be
entered under Rule 155.
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