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adequate books and records or to substantiate items properly.
See sec. 1.6662-3(b)(1), Income Tax Regs.
Petitioners bear the burden of proving that respondent's
determinations of these accuracy-related penalties are erroneous.
See Rule 142(a); ASAT, Inc. v. Commissioner, 108 T.C. 147, 175
(1997).11 Taxpayers are not liable for accuracy-related
penalties if they show that they had reasonable cause for the
underpayment and that they acted in good faith. See sec.
6664(c).
Petitioners failed to maintain adequate records to
substantiate the deductions claimed on their tax returns for the
years in issue. See sec. 6001; sec. 1.6001-1(a), Income Tax
Regs. Petitioners’ records were substandard and, when presented
to the Court, chaotic. Petitioners’ claims that they accurately
reported their income for the years in issue are not aided by
their submitting obviously indecipherable records into evidence.
Petitioners blame respondent’s agents for the jumbled nature of
the records, but they must also concede that they, or Jack, or
their representatives, had some hand in presenting the records as
they now exist. Having examined the records closely, we believe
11 Sec. 7491(c) places the burden of production on the
Commissioner with respect to the liability of any individual for
any penalty, addition to tax, or additional amount, in court
proceedings arising in connection with examinations commencing
after July 22, 1998. The petition in the instant case was filed
in 1996. Accordingly, sec. 7491(c) is inapplicable.
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