- 21 -
(2) rejected petitioners’ position that they are entitled to Mr.
Hopkins’s claimed Schedule C deduction of $67,084 that petition-
ers originally claimed in petitioners’ Schedule E as part of the
nonpassive loss of $103,150 from Mr. Hopkins’s S Corporation.23
On the record before us, we find that respondent has satisfied
respondent’s burden of production under section 7491(c) with
respect to the accuracy-related penalty under section 6662(a)
determined in the notice.
Petitioners argue that respondent’s determination under
section 6662(a) is wrong because “there is substantial authority
for the Sole Proprietorship and the Subchapter S Corporation’s
tax treatment of the expenses for advertising and promotion.”
(We shall refer to that argument as petitioners’ substantial
authority argument.) Although respondent bears the burden of
production with respect to the accuracy-related penalty at issue,
respondent “need not introduce evidence regarding reasonable
cause, substantial authority, or similar provisions. * * * the
taxpayer bears the burden of proof with regard to those
issues.”24 Higbee v. Commissioner, 116 T.C. at 446.
22(...continued)
nonpassive loss was equal to the sum of (1) Mr. Hopkins’s S
Corporation’s claimed 1999 ordinary loss of $36,066 and (2) Mr.
Hopkins’s automobile racing expenditures of $67,084 claimed in
Statement SBE included as part of petitioners’ 1999 joint return.
23See supra note 22.
24We thus reject petitioners’ argument that respondent
(continued...)
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