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Petitioners timely filed Federal individual as well as trust
income tax returns for the years at issue. On September 28,
2005, separate notices of deficiency were sent to each party. In
the notice of deficiency sent to petitioners Glenn and Carol
Kierstead, respondent determined that the trusts must be
disregarded for Federal income tax purposes. Petitioners Glenn
and Carol Kierstead, as well as the two trusts, timely filed
petitions with the Court on December 22, 2005.
OPINION
Section 6662(a) imposes a 20-percent penalty on the portion
of an underpayment attributable to a substantial understatement
of income tax. While 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 determination is incorrect.
Higbee v. Commissioner, supra at 447. Petitioners concede that
respondent has met his burden of production. However, they argue
that they are not liable for a portion of the section 6662(a)
penalties because they, in good faith, relied on the advice of
two competent tax professionals.
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