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imposition of the penalty or addition to tax is appropriate.
Higbee v. Commissioner, supra. Once the Commissioner meets his
burden of production, the taxpayer must come forward with
evidence sufficient to persuade a court that the Commissioner’s
determination is incorrect. Id. at 447.
Respondent determined that a section 6662 accuracy-related
penalty is due with respect to petitioners’ tax return for 2001.
Section 6662 imposes a penalty equal to 20 percent of the portion
of the underpayment attributable to negligence or disregard of
rules or regulations. Sec. 6662(a) and (b)(1). The term
“negligence” is defined as any failure to make a reasonable
attempt to comply with the provisions of the Internal Revenue
Code, and the term “disregard” includes any careless, reckless,
or intentional disregard. Sec. 6662(c). Negligence also
includes any failure by the taxpayer to keep adequate books and
records or to substantiate items properly. Sec. 1.6662-3(b)(1),
Income Tax Regs. Respondent has carried his burden of production
in this case by showing that petitioners failed to fully
substantiate their itemized deductions in several categories.
The accuracy-related penalty will apply unless petitioners
demonstrate that there was reasonable cause for the underpayment
and that they acted in good faith with respect to the
underpayment. Sec. 6664(c). Whether a taxpayer acted with
reasonable cause and good faith depends on the pertinent facts
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