-12-
is not entitled to deduct any expenses beyond those originally
reported on his returns for the years at issue.
V. Accuracy-Related Penalty
We turn now to respondent’s determination in the deficiency
notice that petitioner is liable for the accuracy-related penalty
under section 6662 for each of the years at issue. 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).
A taxpayer is liable for an accuracy-related penalty in the
amount of 20 percent of any part of an underpayment attributable
to, among other things, a substantial understatement of income
tax. There is a substantial understatement of income tax under
section 6662(b)(2) if the amount of the understatement exceeds
the greater of either 10 percent of the tax required to be shown
on the return, or $5,000. Sec. 6662(a), (b)(1) and (2),
(d)(1)(A); sec. 1.6662-4(a), Income Tax Regs. Respondent has met
his burden of production with respect to petitioner’s substantial
understatement of income tax for the years at issue.9 The
following table demonstrates that petitioner understated his
income tax for each year at issue in an amount greater than
9Respondent determined in the alternative that petitioner
was liable for the accuracy-related penalty for negligence or
disregard of rules or regulations under sec. 6662(b)(1) for the
years at issue. Because respondent has proven that petitioner
substantially understated his income tax for the years at issue,
we need not consider whether petitioner was negligent or
disregarded rules or regulations.
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