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On the basis of the foregoing, we sustain respondent’s
determination in the notices of deficiency disallowing
petitioner’s loss carryforwards.
III. Accuracy-Related Penalty
We turn now to respondent’s determination in the notices of
deficiency that petitioner is liable for the accuracy-related
penalty under section 6662(a) for each year at issue. Respondent
has the burden of production under section 7491(c) and must come
forward with sufficient evidence that it is appropriate to impose
the penalty. See Higbee v. Commissioner, 116 T.C. 438, 446-447
(2001).
Respondent determined that petitioner is liable for the
accuracy-related penalty for a substantial understatement of
income tax under section 6662(b)(2) for each year at issue.
There is a substantial understatement of income tax if the amount
of the understatement exceeds the greater of either 10 percent of
the tax required to be shown on the return, or $5,000. Sec.
6662(d)(1)(A); sec. 1.6662-4(a), Income Tax Regs.
Respondent has met his burden of production with respect to
petitioner’s substantial understatement of income tax. The
following table demonstrates that petitioner understated his
income tax for each year at issue in an amount greater than
$5,000 or 10 percent of the tax required to be shown on his
return.
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