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Petitioner argues that he provided all of his records to the
IRS during his audit, fully cooperated with the IRS, and did not
disregard any rules or regulations. Petitioner's alleged
cooperation and conclusory statement do not prove that he was not
negligent. As we stated above, petitioner failed to maintain
adequate records of his income and expenses. We conclude that
petitioner is liable for the additions to tax for negligence for
1986, 1987, and 1988 as determined by respondent to the extent of
any underpayment decided for those years that was not due to
fraud.
Addition to Tax for a Substantial Understatement
Respondent determined that petitioner is liable for
additions to tax for substantial understatements for 1985, 1986,
1987, and 1988 pursuant to section 6661. An understatement is
the difference between the amount required to be shown on the
return and the amount actually shown on the return and is
substantial if it exceeds the greater of (1) 10 percent of the
tax required to be shown on the return for a taxable year, or (2)
$5,000. Sec. 6661(b)(1) and (2)(A). The understatement is
reduced to the extent that the taxpayer has (1) adequately
disclosed his or her position or (2) has substantial authority
for the tax treatment of an item. Sec. 6661; sec. 1.6661-6(a),
Income Tax Regs. Petitioner has the burden of proving he is not
liable for the addition to tax. Rule 142(a).
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