Ronald L. DeVault - Page 15

                                       - 14 -                                         
               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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