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have failed to meet their burden and sustains respondent's
determination with respect to the 2001 unreported income.
B. Accuracy-Related Penalty
Under section 7491(c), the Commissioner has the burden of
production in any court proceeding with respect to the liability
of any individual for any penalty or addition to tax. Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). In order to meet his
burden of production, the Commissioner must come forward with
sufficient evidence indicating that it is appropriate to impose
the accuracy-related penalty. Id. at 446. Once the Commissioner
meets his burden of production, the taxpayer must come forward
with evidence sufficient to persuade a court that the
Commissioner's determination is incorrect. Id. at 447.
Respondent determined that petitioners are liable for the
accuracy-related penalty under section 6662(a). Section 6662(a)
imposes a 20-percent penalty on the portion of an understatement
attributable to any one of various factors, including negligence
or disregard of rules or regulations and a substantial
understatement of income tax. See sec. 6662(b)(1) and (2).
"Negligence" includes any failure to make a reasonable attempt to
comply with the provisions of the Internal Revenue Code,
including any failure to keep adequate books and records or to
substantiate items properly. See sec. 6662(c); sec.
1.6662-3(b)(1), Income Tax Regs. A "substantial understatement"
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