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Accuracy-Related Penalty
The final issue is whether petitioners are liable for the
accuracy-related penalty under section 6662(a) for 1994. Section
6662(a) imposes a penalty in an amount equal to 20 percent of the
portion of the underpayment of tax attributable to a taxpayer's
negligence or any substantial understatement of income tax. See
sec. 6662(a) and (b)(1) and (b)(2).
Section 6662(c) provides that the term "negligence" includes
any failure to make a reasonable attempt to comply with the
provisions of this title, and the term "disregard" includes any
careless, reckless, or intentional disregard of rules or
regulations. The Commissioner's determination that a taxpayer
was negligent is presumptively correct, and the burden is on the
taxpayer to show lack of negligence. See Hall v. Commissioner,
729 F.2d 632, 635 (9th Cir. 1984), affg. T.C. Memo. 1982-337;
Marcello v. Commissioner, 380 F.2d 499, 506-507 (5th Cir. 1967),
affg. in part and remanding in part 43 T.C. 168 (1964); Bixby v.
Commissioner, 58 T.C. 757, 791 (1972). An understatement of tax
is substantial if it exceeds the greater of 10 percent of the tax
required to be shown on the return for the taxable year or
$5,000. See sec. 6662(d)(1)(A)(i) and (ii). The
accuracy-related penalty will apply unless petitioners can
demonstrate that there was reasonable cause for the underpayment
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