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Section 7491(c) places on the Commissioner the burden of
production with respect to a taxpayer’s liability for any
penalty. Respondent satisfied his burden of production because
the record shows that petitioner substantially understated his
income tax for 2000 by $7,981, which amount is greater than
$5,000. See sec. 6662(d)(1)(A)(ii); Higbee v. Commissioner,
supra at 442. Accordingly, petitioner bears the burden of
proving that the accuracy-related penalty should not be imposed
with respect to any portion of the understatement for which he
acted with reasonable cause and in good faith. See sec.
6664(c)(1); Higbee v. Commissioner, supra at 446. The mere fact
that we held against petitioner with respect to his status as a
shareholder of Union Machine does not, in and of itself, require
holding for respondent on the accuracy-related penalty. See
Hitchins v. Commissioner, 103 T.C. 711, 719 (1994).
Petitioner by trade is a machinist with no formal training
or experience in organizing or managing a business, let alone how
to wind up his business affairs.14 Since petitioner left the
employment of Union Machine, he has had no further contact with
Union Machine. Indeed, after petitioner left the employment of
Union Machine, he stopped receiving any form of compensation and
any communication from Union Machine, including upcoming annual
14 Petitioner testified that “because of my own lack of
knowledge in these things, I wasn’t aware of what actions I was
supposed to take.”
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