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Westbrook v. Commissioner, 68 F.3d 868, 881 (5th Cir. 1995),
affg. T.C. Memo. 1993-634; Cramer v. Commissioner, 101 T.C. 225,
251 (1993), affd. 64 F.3d 1406 (9th Cir. 1995); Ma-Tran Corp. v.
Commissioner, 70 T.C. 158, 173 (1978); Pessin v. Commissioner, 59
T.C. 473, 489 (1972); Ellwest Stereo Theatres v. Commissioner,
T.C. Memo. 1995-610.
As previously indicated, section 7491(c) places the burden
of production on the Commissioner. The notices of deficiency
issued to petitioners generally asserted applicability of the
section 6662(a) penalty on account of negligence or disregard,
substantial understatement, and/or substantial valuation
misstatement. See sec. 6662(b). Respondent in its pretrial
memorandum and on brief has addressed only negligence or
disregard of rules or regulations as the basis for the penalties,
and we shall do likewise.
We conclude that respondent has met the section 7491(c)
burden of production with respect to the negligence penalties.
The evidence adduced in these cases reveals a serious dearth of
adequate records and substantiation for reported items. With
this threshold showing, the burden shifts to petitioners to
establish that they acted with reasonable cause and in good faith
as to the claimed items.
Petitioners here assert a reliance defense as the basis upon
which they should be relieved of liability for the section
6662(a) penalties. Mr. Deihl, Mrs. Deihl, and Mr. Goltz
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