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tion with respect to the December 2, 1999 transaction that “The
only rational explanation supported by the record is that the
Petitioners were engaged in obtaining financing” with respect to
lot 5.
Petitioners do not dispute that if the Court were to reject,
as the Court has, petitioners’ substantial authority argument,
there would be a substantial understatement of tax within the
meaning of section 6662(d)(1)(A) for their 1999 taxable year. We
conclude that the burden of production under section 7491(c)
imposed on respondent with respect to the accuracy-related pen-
alty is satisfied.
Petitioners not only advance petitioners’ substantial au-
thority argument in support of their position that they are not
liable for 1999 for the portion of the accuracy-related penalty
that is attributable to their tax treatment of the December 2,
1999 transaction, they also maintain that they are not liable for
such portion of the penalty because they had reasonable cause
for, and acted in good faith in, not reporting that transaction
as a sale in their 1999 return.
In determining whether a taxpayer acted with reasonable
cause and in good faith, generally the most important factor to
consider “is the extent of the taxpayer’s effort to assess the
taxpayer’s proper tax liability.” Sec. 1.6664-4(b)(1), Income
Tax Regs. Petitioners made no effort to ascertain the proper tax
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