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Petitioners contend that Mr. King is engaged in the business
of farming. However, we need not decide this issue because
petitioners offered no evidence and make no argument that they
meet any of the other requirements of section 175. There is no
evidence that petitioners had an approved soil conservation plan,
that they had consent from the Secretary to adopt the method to
deduct soil and water conservation expenses under section 175, or
that they adopted the method to deduct soil and water
conservation expenses under section 175 in the first taxable year
ending after August 16, 1954, in which they paid or incurred soil
and water conservation expenses. We conclude that petitioners
may not deduct soil and water conservation expenses under section
175 for any of the years in issue.
G. Whether Petitioners Are Liable For the Accuracy-Related
Penalty for 1995-97
1. Whether Respondent Met the Burden of Production
Respondent has the burden of producing evidence showing that
petitioners are liable for the accuracy-related penalty. Sec.
7491(c). Respondent has met that burden by showing that
petitioners: (1) Had inadequate records and book-keeping
methods; (2) overstated costs of goods sold and deductions; and
(3) understated gross receipts and income.
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