Robert Lee and Rebecca Waters - Page 14

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          B.  Accuracy-related Penalty                                                
               Next, we consider whether petitioners are liable for the               
          accuracy-related penalty under section 6662(a).                             
               Section 6662(a) and (b)(1) provides that if any portion of             
          an underpayment of tax is attributable to negligence or disregard           
          of rules or regulations, then there shall be added to the tax an            
          amount equal to 20 percent of the amount of the underpayment that           
          is so attributable.  The term “negligence” includes any failure             
          to make a reasonable attempt to comply with the provisions of the           
          internal revenue laws, and the term “disregard” includes any                
          careless, reckless, or intentional disregard.  Sec. 6662(c); see            
          sec. 1.6662-3(b)(2), Income Tax Regs.   However, no penalty shall           
          be imposed with respect to any portion of an underpayment if it             
          is shown that there was a reasonable cause for such portion and             
          that the taxpayer acted in good faith with respect to such                  
          portion.  Sec. 6664(c).                                                     
               Applicable to court proceedings arising in connection with             
          examinations commencing after July 22, 1998, section 7491(c)                
          places on the Commissioner the burden of production with respect            
          to a taxpayer’s liability for any penalty or addition to tax.               
          See Internal Revenue Service Restructuring and Reform Act of                
          1998, Pub. L. 105-206, sec. 3001(a), (c)(1), 112 Stat. 685, 726,            
          727.  However, the taxpayer still bears the burden of proving               
          that the negligence penalty is inapplicable.  Rule 142(a);                  

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