Nariman Teymourian - Page 18

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          respectively.  Petitioner contests these penalties, arguing that            
          there was no underpayment of tax, or in the alternative,                    
          petitioner had reasonable cause for his underpayment of taxes.              
               Section 6662(a) imposes an accuracy-related penalty of 20              
          percent of the underpayment of tax attributable to negligence or            
          disregard of the rules or regulations,7 or attributable to a                
          substantial understatement of income tax.8  Sec. 6662(a), (b)(1)            
          and (2).  However, no penalty will be imposed if the taxpayer had           
          reasonable cause for the underpayment of tax and the taxpayer               
          acted in good faith.  Sec. 6664(c); secs. 1.6662-3(a), 1.6664-              
          4(a), Income Tax Regs.                                                      
               The Commissioner bears the burden of production with respect           
          to penalties.  Sec. 7491(c); Higbee v. Commissioner, 116 T.C.               
          438, 446-447 (2001).  However, the taxpayer must show that he had           
          reasonable cause and acted in good faith.  Rule 142(a).                     
               Petitioner conceded that he received, but did not report,              
          long-term capital gain of $137,880, additional income of                    
          $4,415.57 in 1999, and additional income of $10,000 in 2000.  We            

               7  Negligence is defined as the “failure to make a                     
          reasonable attempt to comply with the provisions of this title,             
          and the term ‘disregard’ includes any careless, reckless, or                
          intentional disregard.”  Sec. 6662(c); sec. 1.6662-3(b)(1),                 
          Income Tax Regs.                                                            
               8  There is a substantial understatement of income tax for             
          any year if the amount of understatement exceeds the greater of             
          10 percent of the tax required to be shown on the return, or                
          $5000.  Sec. 6662(d).                                                       

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