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apply to any portion of an underpayment if it is shown that there
was reasonable cause for such portion of the underpayment and
that the taxpayer acted in good faith with respect to such
portion. Sec. 6664(c)(1). In general, the determination of
whether a taxpayer acted with reasonable cause and in good faith
depends upon the pertinent facts and circumstances. Sec. 1.6664-
4(b)(1), Income Tax Regs. The crucial factor is the extent of
the taxpayer’s effort to assess the proper tax liability. Id.
Respondent has met his burden of production and petitioners bear
the burden of proving that the reasonable cause exception is
applicable. Sec. 7491(c); Rule 142(a); Higbee v. Commissioner,
116 T.C. 438, 446-447 (2001); Jelle v. Commissioner, 116 T.C. 63,
72 (2001).
Petitioners have offered no discussion or argument with
respect to this issue. Based on the facts before us, we conclude
that petitioners had no reasonable cause for treating the alleged
tutor activity and the alleged editor activity as activities
engaged in for a profit. Petitioner claimed unwarranted
deductions. Accordingly, we sustain respondent’s determination
that petitioners are liable for the accuracy-related penalty
under section 6662(a).
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Last modified: May 25, 2011