-10-
misunderstanding of fact or law that is reasonable in light of
all the facts and circumstances, including the experience,
knowledge and education of the taxpayer." Sec. 1.6664-4(b)(1),
Income Tax Regs.; see Reynolds v. Commissioner, 296 F.3d 607, 618
(7th Cir. 2002), affg. T.C. Memo. 2000-20.
Respondent has satisfied his burden of production under
section 7491(c) by establishing that petitioner received the
settlement payment and failed to include it in income.
Petitioner does not dispute receiving the payment.
The settlement payment represented more than 140 percent of
petitioner's annual income. A reasonable and ordinarily prudent
person would have sought the advice of a knowledgeable person to
ensure the proper tax treatment of such a large payment.
Additionally, the settlement agreement specifically stated that
Universal considered the payment to be nonwage income and that
they would issue a Form-1099 for the payment. The settlement
agreement required petitioner to indemnify Universal against any
claims or penalties arising from her tax treatment of the
settlement payment. During the drafting of the settlement
agreement petitioner was represented by counsel, and she could
have taken that opportunity to determine the proper tax treatment
of the payment. The Court holds that petitioner is liable for
the accuracy-related penalty under section 6662(a).
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