Stewart L. and Patricia A. Welch - Page 8




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               We hold that petitioners are liable for the accuracy-related           
          penalties determined in the notice of deficiency.  Petitioners              
          have failed to establish that any of the related underpayments              
          were not due to their negligence or disregard of rules or                   
          regulations.  As to the accuracy-related penalties alleged in               
          answer, however, we hold for petitioners.  Respondent has not met           
          his burden of proof with respect to those amounts.  E.g., Sproul            
          v. Commissioner, T.C. Memo. 1995-207.  Whereas respondent in                
          brief recognizes that he bears the burden as to those amounts,              
          respondent concludes erroneously that petitioners are liable for            
          the accuracy-related penalties alleged in answer because they               
          have failed to disprove their liability for such amounts.                   
          Respondent states:                                                          
                    Petitioners underreported their income for 1993,                  
               1994, and 1995.  Though their returns were prepared by                 
               a tax service, petitioners did not present any evidence                
               as to their return preparer’s qualifications or to show                
               that the underreporting was due to any act of their                    
               returns preparer or reliance upon his advice.                          
               Moreover, they have introduced no evidence which could                 
               serve as a basis for the Court to find that there was                  
               reasonable cause for their underreporting.                             
               Accordingly, petitioners should be held liable for the                 
               accuracy-related penalty for 1994 [sic], 1994, and                     
               1995, respectively.                                                    
               All arguments of the parties not discussed herein have been            
          considered and rejected as meritless.  Accordingly,                         
                                                  Decision will be entered            
                                             under Rule 155.                          







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