Jerry L. and Valerie J. Hill - Page 6

               Respondent bears the burden of production under section                
          7491(c) and must come forward with sufficient evidence indicating           
          that it is appropriate to impose an accuracy-related penalty.               
          Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).  Once                 
          respondent has met this burden, the taxpayer must come forward              
          with persuasive evidence that the accuracy-related penalty does             
          not apply.  Id.  The taxpayer may establish, for example, that              
          part or all of the accuracy-related penalty is inapplicable                 
          because it is attributable to an understatement for which the               
          taxpayer acted with reasonable cause and in good faith.  Sec.               
          6664(c)(1).  Whether a taxpayer acted as such is a factual                  
          determination, sec. 1.6664-4(b)(1), Income Tax Regs., for which             
          the taxpayer’s effort to assess the proper tax liability is a               
          very important consideration.                                               
               Here, petitioners concede that respondent has met his burden           
          of production in that the parties agree that the understatement             
          on petitioners’ return is “substantial” within the meaning of               
          section 6662(d)(1).  Petitioners argue that they acted reasonably           
          as to the subject matter of the deficiency in that, they assert,            
          Hill relied reasonably upon his tax preparer to prepare                     
          petitioners’ 1999 tax return correctly.  Although reliance on the           
          advice of a professional as to the tax treatment of an item may             
          sometimes be enough to escape the imposition of a section 6662(a)           
          accuracy-related penalty, see United States v. Boyle, 469 U.S.              

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