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For purposes of section 6662, negligence “includes any
failure to make a reasonable attempt to comply with the
provisions of this title,” and disregard “includes any careless,
reckless, or intentional disregard.” Sec. 6662(c); Drum v.
Commissioner, T.C. Memo. 1994-433, affd. without published
opinion 61 F.3d 910 (9th Cir. 1995).
Under section 7491(c), respondent bears the burden of
production with respect to the section 6662(a) penalty. See also
Rule 142(a). If, however, respondent satisfies his burden of
production, the taxpayer continues to have the burden of proof
with respect to imposition of this penalty. Rule 142(a); Higbee
v. Commissioner, 116 T.C. 438 (2001).
Respondent has satisfied his burden of production under
section 7491(c) because petitioners have conceded that they are
liable for increased tax liabilities relating to the collapse of
the trusts and because we have found that petitioners understated
the amount of gain they realized on the sale of their residence
and overstated the amount of their charitable deduction with
respect to the van.
Petitioners unreasonably relied on NTS and Mr. Fritz in
establishing the three trusts, on unsubstantiated costs with
regard to the gain on the sale of the residence, and on an
appraisal that was not credible with regard to the value of the
van.
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