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The accuracy-related penalty under section 6662(a) does not
apply to any portion of an underpayment, however, if it is shown
that there was reasonable cause for, and that the taxpayer acted
in good faith with respect to, that portion. Sec. 6664(c)(1);
sec. 1.6664-4(b), Income Tax Regs. The determination of whether
the taxpayer acted with reasonable cause and in good faith
depends on the pertinent facts and circumstances, including the
taxpayer’s efforts to assess his or her proper tax liability and
the knowledge and experience of the taxpayer. Sec.
1.6664-4(b)(1), Income Tax Regs.
Petitioners argue that the penalty should not apply because
they should be able to deduct expenses as other professionals are
able to deduct business-related expenses. Petitioners contend
that they incurred these expenses because the school district
lacked the funds necessary to develop and improve their teaching
abilities as an English teacher and a golf coach. While the
Commissioner bears the burden of production under section
7491(c), taxpayers bear the burden of proof with regard to
reasonable cause. Higbee v. Commissioner, supra at 446.
We find that petitioners failed to establish that there was
reasonable cause for the underpayment. We recognize that Mr.
Garcia may have had good intentions when he joined the country
club to give his team a place to practice golf and that some of
Mrs. Garcia's expenses were incurred with her students' best
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Last modified: May 25, 2011