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Because petitioner failed to prove that a theft loss in
excess of $5,586 occurred,10 we do not reach the question of
timing.
Section 7491(c) provides that the Commissioner bears the
burden of production with respect to the liability of any
individual for any addition to tax or penalty. Consequently,
respondent must produce sufficient evidence to demonstrate that
the accuracy-related penalty is appropriate. See Higbee v.
Commissioner, 116 T.C. at 446.
Section 6662(a) imposes a 20-percent accuracy-related
penalty with respect to the portion of any underpayment of tax
attributable to a substantial understatement of income tax. An
“understatement” is the excess of the amount of tax required to
be shown on the return over the amount of tax that is actually
shown on the return. Sec. 6662(d)(2)(A). A “substantial
understatement” of income tax exists if the amount of the
understatement for the taxable year exceeds the greater of (1) 10
percent of the tax required to be shown on the return or (2)
$5,000. Sec. 6662(d)(1)(A).
On his return, petitioner indicated a tax liability of zero.
Respondent determined the appropriate tax was $159,008. The
10Although the evidence at trial suggests that no theft at
all occurred, on brief respondent has maintained the same
position as taken in the notice of deficiency and does not seek
to disallow the deduction allowed in the notice of deficiency.
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