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While we are willing to assume that petitioner sold some assets
to Czarnowski, petitioner failed to provide any information
concerning the identity of the assets, the bases of the assets,
or when they were purchased. Without this information, we can
only find that the entire amount received constituted taxable
income to him. Respondent is sustained on this issue.
Accuracy-Related Penalty
Section 6662 imposes an accuracy-related penalty “equal to
20 percent of the portion of the underpayment” of tax
attributable to “Any substantial understatement of income tax.”
Sec. 6662(a) and (b)(2). A substantial understatement of income
tax exists if the amount of the understatement for the taxable
year exceeds the greater of 10 percent of the tax required to be
shown on the return for the taxable year, or $5,000. Sec.
6662(d)(1)(A).4
A taxpayer is relieved of the accuracy-related penalty “if
it is shown that there was a reasonable cause * * * and that the
taxpayer acted in good faith”. Sec. 6664(c)(1).5 Whether the
taxpayer acted with reasonable cause and in good faith is
determined by the relevant facts and circumstances, and, most
4 It is unclear whether, after respondent’s concessions, a
substantial understatement of income remains. We leave this
issue for resolution in the Rule 155 computations.
5 Respondent has satisfied his burden of production under
sec. 7491(c).
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Last modified: May 25, 2011