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careless, reckless, or intentional disregard. See sec. 6662(c).
Negligence also includes any failure by the taxpayer to keep
adequate books and records or to substantiate items properly.
See sec. 1.6662-3, Income Tax Regs. An individual taxpayer’s
understatement is substantial if the amount of the understatement
exceeds the greater of 10 percent of the tax required to be shown
on the return or $5,000. See sec. 6662(d)(1)(A). The accuracy-
related penalty is not to be imposed if it is shown that there
was reasonable cause for the underpayment and that the taxpayer
acted in good faith. See sec. 6664(c)(1). Petitioners have the
burden of showing that they are not liable for the accuracy-
related penalties. See Welch v. Helvering, 290 U.S. 111 (1933).
In support of his determination, respondent contends that
petitioners allowed the accumulation of substantial amounts of
losses from Omega’s farm activity to reduce the income produced
by Omega’s recycling business. Respondent’s contention that
Omega’s farming activity was continued for the purpose of using
losses to reduce Omega’s highly profitable recycling business
income is supported by the facts. The size of Omega’s
expenditures compared to the meager revenue it received without
attempting to increase receipts or cut expenses, on this record,
supports no other conclusion. Over a 6-year period, Omega’s farm
activity generated losses totaling $833,564, with gross receipts
totaling only $25,820. There is no other apparent motivation in
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