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the South Point Road lot. As they did not own the South Point
Road lot, petitioners are not entitled to exclude the gain on its
sale under section 121.11 Allied Marine Sys., Inc. v.
Commissioner, T.C. Memo. 1997-101, affd. without published
opinion sub nom. Gibbons v. Commissioner, 155 F.3d 558 (4th Cir.
1998).
C. Penalty Under Section 6662(a)
Section 6662(a) imposes a 20-percent penalty on the portion
of an underpayment attributable to negligence or disregard of the
rules or regulations. Although the Commissioner bears the
initial burden of production and must come forward with
sufficient evidence showing it is appropriate to impose an
accuracy-related penalty, the taxpayer bears the burden of proof
as to any exception to the penalty. See sec. 7491(c); Rule
142(a); Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). In
order to meet the burden of proof, a taxpayer must present
evidence sufficient to persuade the Court that the Commissioner’s
11The parties have stipulated that the sale of the South
Point Road lot resulted in a gain of $278,962. In accordance
with the partnership agreement, petitioners had a combined 70
percent profits interest in the Family Partnership. Therefore,
there is a taxable gain to petitioners of their distributive
share of the gain in the amount of $195,273.
As the Family Partnership qualifies under the “small
partnership” exception to the partnership audit and litigation
procedures, secs. 6221-6233, respondent was not required to issue
a notice of final partnership administrative adjustment to the
Family Partnership. Sec. 6231(a)(1)(B).
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Last modified: March 27, 2008