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including some event in the bankruptcy proceeding. Petitioners
have not shown reasonable cause for their failure to timely file.
Respondent has met his burden of production with regard to this
addition to tax. Accordingly, we hold petitioners are liable for
the addition to tax under section 6651(a)(1).
Respondent also determined petitioners are subject to a
penalty under section 6662(a). This penalty is imposed on any
portion of an underpayment of tax required to be shown on a
return when the underpayment is due to negligence or disregard of
rules or regulations, or a substantial understatement of income
tax. See sec. 6662(a) and (b).
A substantial understatement of tax is defined as an
understatement of tax that exceeds the greater of 10 percent of
the tax required to be shown on the tax return or $5,000. See
sec. 6662(d)(1)(A)(i) and (ii). The understatement may be
reduced by an amount attributable to any item for which there was
adequate disclosure and a reasonable basis for which there was
substantial authority. See sec. 6662(d)(2)(B). Section 6662(c)
defines negligence as “any failure to make a reasonable attempt
to comply with the provisions of this title”, and disregard means
any “careless, reckless, or intentional disregard.”
Respondent relies on the record, which reflects that there
was a substantial understatement in this case. That satisfies
respondent’s burden of production as to the substantial
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