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and reasonable care in the preparation of a tax return. Sec.
6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. The term
“disregard” includes any careless, reckless, or intentional
disregard. Sec. 6662(c). A taxpayer’s disregard is
“intentional” if the taxpayer knows of the rule or regulation
that is disregarded. Sec. 1.6662-3(b)(2), Income Tax Regs.
Respondent has the burden of production under section 7491(c) and
must come forward with sufficient evidence indicating that it is
appropriate to impose the penalty. See Higbee v. Commissioner,
116 T.C. 438, 446-447 (2001). Once respondent meets his burden
of production, the taxpayer must come forward with persuasive
evidence that respondent’s determination is incorrect. Id.
As discussed above, petitioner was advised as to the tax
consequences of her transactions involving the Happy Valley
property by Coburn in his correspondence of May 1, 1997. Even
though petitioner was aware of the tax consequences of these
transactions, her 1997 and 1998 returns do not reflect the
correct amount of gain that she recognized on the sale of her
undivided 50-percent interest in the Happy Valley property
because she failed to provide to Coburn the Settlement Agreement
and quitclaim deed that transferred Mr. Walker’s 25-percent
interest in the Happy Valley property to her. (When Mr. Walker
filed an amended return for 1997, petitioner made a
misrepresentation to Coburn by stating that the transaction
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