- 11 -
person would employ under the same circumstances. See Neely v.
Commissioner, 85 T.C. 934, 947 (1985). A taxpayer is not liable
for the penalty if he shows that there was reasonable cause for
the underpayment and that he acted in good faith. See sec.
6664(c)(1).
Petitioner bears the burden of proving that the accuracy-
related penalties are inapplicable.3 See Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933); Bixby v. Commissioner, 58
T.C. 757, 791-792 (1972).
Petitioner is a certified public accountant. His purported
purchase and resale of the Bowmen Lane property clearly were
undertaken solely with the intent to meet the nonrecognition
provisions of section 1034. Petitioner knew or should have known
that a transaction devoid of any substance does not meet the
requirements of section 1034 and the regulations promulgated
thereunder.
Accordingly, we hold that petitioner is liable for
accuracy-related penalties pursuant to section 6662(a) for 1993
and 1995 with respect to the understatements of tax attributable
3 Sec. 7491(c), applicable to court proceedings arising in
connection with examinations commencing after July 22, 1998,
requires the Secretary to carry the burden of production with
respect to penalties. See Internal Revenue Service Restructuring
& Reform Act of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685,
726. The notice of deficiency at issue herein, however, was
dated December 12, 1997.
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