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taxpayer’s efforts to assess his proper tax liability, including
the taxpayer’s reasonable and good faith reliance on the advice
of a professional such as an accountant.” Higbee v.
Commissioner, supra at 448-449. Other circumstances that may
indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light of
all the facts and circumstances, including the experience,
knowledge, and education of the taxpayer. Sec. 1.6664-4(b)(1),
Income Tax Regs.
To prevail, the Commissioner must produce sufficient
evidence that it is appropriate to apply the penalty to the
taxpayer. Higbee v. Commissioner, supra at 446. Once the
Commissioner meets his burden of production, the taxpayer bears
the burden of supplying sufficient evidence to persuade the Court
that the Commissioner’s determination is incorrect. Id. at 447.
Petitioner has failed to keep adequate records or to
substantiate properly the items in question. The record
indicates that there is a substantial understatement of tax on
petitioner’s return. Respondent has provided sufficient evidence
to meet his burden of production. Petitioner has not produced
evidence to prove that respondent’s determination of either
negligence or, alternatively, a substantial understatement is
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Last modified: May 25, 2011