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Accuracy-Related Penalty
Respondent determined that petitioner is liable for an
addition to tax under section 6662(a) because (1) petitioner was
negligent or disregarded rules or regulations, or (2)
petitioner’s deficiency represents a substantial understatement
of income tax. Respondent has the burden of production under
section 7491(c) and must come forward with sufficient evidence
that it is appropriate to impose the penalty. See Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
Section 6662(a) imposes an accuracy-related penalty of 20
percent of the portion of the underpayment of tax attributable to
the actions set forth in section 6662(b). Section 6662(b)(2)
provides for an addition to tax in the amount of 20 percent for
any “substantial understatement of income tax.” A substantial
understatement is defined as the greater of 10 percent of the tax
required to be shown on the return or $5,000. Sec.
6662(d)(1)(A).
Petitioner reported Federal income tax of $13,373.
Respondent determined in the statutory notice of deficiency that
the tax required to be shown on petitioner’s return is $19,334.
The Court is satisfied that petitioner substantially understated
the income tax required to be shown on his return and that
respondent has met his burden of production with respect to the
accuracy-related penalty.
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Last modified: May 25, 2011