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accuracy-related penalty is equal to 20 percent of any portion of
an underpayment of tax required to be shown on the return that is
attributable to, among other choices, any substantial
understatement of income tax. Sec. 6662(a) and (b)(2). A
taxpayer has a substantial understatement of income tax if the
amount of the understatement exceeds the greater of either 10
percent of the tax required to be shown on the return for the
taxable year or $5,000. Sec. 6662(d)(1)(A).
The penalties provided for in section 6662 are not imposed
on any portion of an underpayment if it is shown that there was
reasonable cause for such portion and the taxpayer acted in good
faith with respect to that portion. Sec. 6664(c)(1); sec.
1.6664-4(b), Income Tax Regs. Whether the taxpayer has acted
with reasonable cause and in good faith is determined by relevant
facts and circumstances, including the taxpayer’s own efforts to
assess his proper tax liability. Sec. 6664(c); Stubblefield v.
Commissioner, T.C. Memo. 1996-537.
Petitioners do not dispute adjustments in the notice of
deficiency including omitted wage income of $144, omitted
interest income of $15, and omitted cancellation of debt income
of $1,141. Also, at trial petitioners conceded omitted income
received from Sal Parziale or JWH of $11,471. Further, we
concluded that petitioner received an additional $8,000 from this
source. Petitioners did not provide any explanation as to the
failure to report these items of income. We conclude that
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