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Petitioners bear the burden of showing that there was
reasonable cause for, and that they acted in good faith
with respect to, a portion of an underpayment. Rule 142.
As to the portion of the penalty determined by
respondent with respect to the adjustment of petitioners'
deduction of advertising expenses, petitioners make the
following argument:
Since the petitioner has demonstrated to
the court that he did not engage in careless,
reckless, or intentional disregard of any
existing statute, and since the respondent has
been unable to prove that the petitioner acted
in any manner other than in good faith, the
petitioner submits that the penalties should
not apply.
Based upon Dr. Remy's testimony, it is evident that he
attempted to research the tax law to find authority for his
position that the amount of his noncompensated telephone
services is deductible. It is also evident that he took
steps to accurately document the extent of his telephone
services by maintaining a log. However, this is not enough
to be relieved of the accuracy-related penalty. Section
6664(c)(1) requires "a reasonable cause". In this case,
petitioners have not shown that the underpayment
attributable to the deductions in question was due to
reasonable cause. To the contrary, we cannot find
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