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of an underpayment with respect to which it is shown that there
was a reasonable cause and that the taxpayer acted in good faith.
Sec. 6664(c)(1). The decision as to whether the taxpayer acted
with reasonable cause and in good faith depends upon all
pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income
Tax Regs. The most important factor is the extent of the
taxpayer's efforts to assess the proper tax liability. Id.
Circumstances that may indicate reasonable cause and good faith
include an honest misunderstanding of fact or law that is
reasonable in light of the experience, knowledge, and education
of the taxpayer. Id. Petitioners must establish error in
respondent's determination that they are liable for the penalty
provided pursuant to section 6662(a). Rule 142(a); Estate of
Monroe v. Commissioner, 104 T.C. 352, 366 (1995).
As to the penalties determined by respondent in the notice
of deficiency, petitioners contend that they are not liable
because, at the audit, they produced canceled checks in support
of their deductions. Additionally, petitioners argue that
respondent required evidence beyond petitioners' checks that, in
some cases, was impossible to produce. Finally, petitioners
contend that there was no negligence and that they acted in good
faith.
We conclude that petitioners have not established error in
respondent's determination that they are liable for the section
6662(a) penalty. The section 6662(a) penalty does not apply to
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