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underpayment and the taxpayer acted in good faith with respect to
the underpayment. See sec. 6664(c). It is well established that
petitioner bears the burden of proof on this issue. See Bixby v.
Commissioner, 58 T.C. 757, 791 (1972).
Petitioner has not sustained his burden. In 1995,
petitioner claimed losses from the automobile drag racing
activity aggregating $70,428.52 with no apparent expectation that
the activity would ever become profitable. Petitioner's
participation in this activity was predominantly for pleasure and
recreation. Additionally, we have found that the income
petitioner reported as nontaxable in 1995 and 1996 should have
been included in his gross income. Petitioner offered no basis
at trial for his decision to report the income as nontaxable.
Accordingly, we sustain respondent on this issue and hold that
petitioner is liable for the accuracy-related penalty pursuant to
section 6662(a) in 1995 and 1996.
Decision will be entered
for respondent.
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