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the issue as to the taxability of Johnston Island wages. We do
not regard petitioner’s treatment on his 2000 individual Federal
income tax return of his Johnston Island wages as negligent.
We turn to the question of whether petitioner’s tax return
treatment of his Johnston Island wages constituted a substantial
understatement giving rise to the accuracy-related penalty. The
grounds on which a substantial understatement may be reduced
include tax treatments that are based on adequate disclosure and
a reasonable basis. Sec. 6662(d)(2)(B)(ii).
The disclosure made on petitioner’s 2000 Federal income tax
return, as reflected on petitioner’s retained copy of such
return, constitutes adequate disclosure for purposes of
section 6662(d)(2)(B)(ii). Respondent provides no explanation
for the incomplete nature of respondent’s printout of
petitioner’s 2000 individual Federal income tax return. In
deciding this disclosure issue, particularly in light of
respondent’s burden of production on this penalty, we believe it
appropriate to rely on the information reflected on petitioner’s
retained copy of his 2000 individual Federal income tax return.
On the facts of this case, the disclosure issue is resolved in
favor of petitioner.
With regard to reasonable basis, we incorporate our
discussion above and conclude that petitioner, on his 2000
individual Federal income tax return, had a reasonable basis for
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