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produce sufficient evidence indicating that imposition of the
section 6662(a) accuracy-related penalties against an individual
is appropriate. Higbee v. Commissioner, 116 T.C. 438, 446
(2001). Respondent has met this burden of production.74
Petitioners now must demonstrate that respondent’s determinations
are incorrect. Id. at 447.
Petitioners advance three arguments for both Menards and Mr.
Menard against imposition of the section 6662(a) accuracy-related
penalties: (1) Petitioners’ positions had a realistic
possibility of being sustained on the merits; (2) the issues were
complex or technical; and (3) petitioners had reasonable cause
for their positions and assumed them in good faith. We examine
each one of petitioners’ contentions in turn.
A. Petitioners’ First Theory
Section 1.6662-3(a), Income Tax Regs., shields a taxpayer
from the section 6662(a) accuracy-related penalty, if certain
exceptions apply. One exception pertains to taxpayer positions
that are “contrary to a revenue ruling or notice * * * issued by
the * * * [Commissioner] and published in the Internal Revenue
74The record amply demonstrates, among other things, that
Menards’s record keeping with respect to its payment of TMI’s
expenses was not adequate, that Mr. Menard’s loans to Menards
were payable on demand, that Menards had the financial ability to
pay the accrued interest to Mr. Menard during TYE 1998, and that
Mr. Menard failed to report the accrued interest on his 1998 tax
return.
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