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important factor is the extent of the taxpayer’s effort to assess
his proper tax liability for the year. Id.
Petitioners made a substantial understatement of tax on
their 1996 return. They have failed to produce books and records
or to otherwise show the method used to arrive at the amounts of
the deductions and income which were reported. Based on the
record before us, we find petitioners have not established that
they had substantial authority or a reasonable basis for the
items in question. Nor have they established that there was
reasonable cause for the underpayment or that they acted in good
faith with respect to the underpayment. Consequently, we sustain
respondent’s determination that petitioners are liable for the
section 6662(a) accuracy-related penalty for 1996.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decisions will be entered
for respondent in docket No.
2730-01S and under Rule 155 in
docket No. 2731-01S.
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