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$39,274 as expenses incurred in petitioner’s consulting business.
We note that petitioner prepared his own 1996 Federal income tax
return.
Under section 7491(c), respondent must carry the “burden of
production” with respect to the question of whether petitioners
are liable for penalties, including the accuracy-related penalty.
See Higbee v. Commissioner, 116 T.C. ___, ___, (2001) (slip op.
at 14). We have concluded that the burden of production required
of the Commissioner is that he “must come forward with sufficient
evidence indicating that it is appropriate to impose” the
accuracy-related penalty. Id. at ___ (slip op. at 15).
There is sufficient evidence in this record to support our
holding that respondent has met the above-described burden.
Petitioners’ very act of veiling their claim of expenses for
their daughter’s domestic relations litigation as part of an
engineering consulting business shows that they acted negligently
and not with good faith. Petitioners’ reporting position gave
the false impression that the $39,274 was being claimed in a
Schedule C activity that was connected with “Engineering”. In
addition, petitioners’ attempt to claim what are clearly personal
expenditures as a business item supports the imposition of the
penalty. Under these circumstances, we find petitioners liable
for the accuracy-related penalty of section 6662(a) with respect
to the portion of the underpayment attributable to their claim of
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