-32-
Respondent concedes that he bears the burden of production
under section 7491(c) and must come forward with sufficient
evidence indicating that it is appropriate to impose an
accuracy-related penalty on account of a substantial
understatement of income tax. See Higbee v. Commissioner,
116 T.C. 438, 446-447 (2001). In that we discern from the record
that petitioners’ understatement is in excess of $5,000, and of
10 percent of the amount required to be shown on the return, we
conclude that respondent has met this burden of production.
Petitioners bear the burden of proving that the accuracy-related
penalty does not apply because of reasonable cause, substantial
authority, or the like. Id.
In an attempt to meet their burden of proof, petitioners
argue in brief that they are not liable for the accuracy-related
penalty because they acted reasonably and in good faith by
relying on their tax adviser to prepare their 2002 Federal income
tax return correctly. Petitioners also try to prove that they
acted reasonably and in good faith by noting that the taxpayer in
Facq v. Commissioner, T.C. Memo. 2006-111, was in a similar
setting. There, the Court declined to sustain respondent’s
determination of an accuracy-related penalty for (among other
reasons) substantial understatement of income tax, stating that
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