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principal place of abode as the taxpayer for more than one-half
of the taxable year, and is a son or daughter of the taxpayer.
Sec. 32(c)(3)(A),(B).
Petitioner has not shown that his home was the child’s
principal place of abode for more than one-half of 2002.
Petitioner is not an eligible individual with a qualifying child.
Respondent’s disallowance of the earned income credit is
sustained.
Accuracy-Related Penalty
Section 6662 imposes an accuracy-related penalty “equal to
20 percent of the portion of the underpayment” of tax
attributable to “Any substantial understatement of income tax”.
Sec. 6662(a) and (b)(2). A substantial understatement of income
tax exists if the amount of the understatement for the taxable
year exceeds the greater of 10 percent of the tax required to be
shown on the return for the taxable year or $5,000. Sec.
6662(d)(1)(A). Respondent has met his burden of production with
respect to petitioners’ substantial understatement of income for
the year at issue. Sec. 7491(c).
Petitioner contends that he is not liable for the
accuracy-related penalty because he is the custodial parent under
section 152(e) for the year in issue and is entitled to the
dependency exemption deduction. Generally, a taxpayer may avoid
the imposition of the accuracy-related penalty if “there was a
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Last modified: May 25, 2011