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As a defense to the penalty, petitioner bears the burden of
proving that he acted with reasonable cause and in good faith.
See sec. 6664(c)(1); see also Higbee v. Commissioner, supra; sec.
1.6664-4(b)(1), Income Tax Regs.
Respondent satisfied his burden of production under section
7491(a)(1) because the record shows that petitioner substantially
understated his income tax for the year in issue. See sec.
6662(d)(1)(A)(ii); Higbee v. Commissioner, supra at 442.
Accordingly, petitioner bears the burden of proving that the
accuracy-related penalty should not be imposed with respect to
any portion of the understatement for which he acted with
reasonable cause and in good faith. See sec. 6664(c)(1); Higbee
v. Commissioner, supra at 446.
A review of this record reflects that petitioner claimed
substantial deductions for which he apparently maintained no
records. Further, some of the claimed deductions, like bad
debts, which petitioner testified was personal interest, are
clearly nondeductible personal items. Based on this entire
record, we conclude that petitioner is liable for the penalty
under section 6662(a).
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011