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beneficiaries in St. Kitts, West Indies, and Nevis, West Indies.
See sec. 1.6662-3(b)(1), Income Tax Regs. Accordingly,
respondent met his burden of production for the section 6662
penalty for the years in issue.
Petitioners failed to establish that they had reasonable
cause or acted in good faith for the years in issue.
Accordingly, petitioners are liable for the section 6662(a)
penalty for 2002 and 2003.
C. Section 6673(a)(1)
The Court considers, sua sponte, whether petitioners have
engaged in behavior that warrants imposition of a penalty
pursuant to section 6673. Section 6673(a)(1) authorizes the Tax
Court to require a taxpayer to pay to the United States a penalty
not in excess of $25,000 whenever it appears that proceedings
have been instituted or maintained by the taxpayer primarily for
delay.
The circumstances herein suggest that petitioners may have
instituted and maintained this proceeding primarily for purposes
of delay. Petitioners filed three motions for continuance--the
first was filed shortly before trial, the second was filed at
calendar call, and the last was filed on the date of trial. The
Court denied all three motions for continuance.
Furthermore, Arnold v. Commissioner, T.C. Memo. 2005-256
(Arnold I), involved petitioners’ 1999, 2000, and 2001 tax years
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