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Commissioner, 116 T.C. 438, 446 (2001). Once the burden of
production is met, the taxpayer must come forward with
sufficient evidence that the penalty does not apply. Id. at
447.
The tax required to be shown on petitioner’s tax
returns was $26,378 and $19,845, for 1999 and 2000,
respectively. Because 10 percent of the tax required to be
shown is less than $5,000, petitioner’s understatements are
substantial if they exceed $5,000. Petitioner reported
income tax liabilities of $19,261 and $14,375, resulting in
understatements of $7,117 and $5,470 for 1999 and 2000,
respectively. Respondent has satisfied his burden by
showing that petitioner’s understatements of tax, which
exceeded $5,000, were substantial.
The accuracy-related penalty is not imposed, however,
with respect to any portion of the understatement if the
taxpayer can establish that she acted with reasonable cause
and in good faith. Sec. 6664(c)(1). The decision as to
whether the taxpayer acted with reasonable cause and in good
faith depends upon all the pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
Circumstances indicating that a taxpayer acted with
reasonable cause and in good faith include “an honest
misunderstanding of fact or law that is reasonable in light
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