- 4 - The amounts required to be reported by petitioners on their income tax returns for the years in issue and the understatements determined by respondent for those years are set forth in our findings. The amount of the understatement for each of the years in issue is more than 10 percent of the tax required to be shown and greater than $5,000, which meets the section 6662(d) definition of “substantial understatement”. Thus, petitioners substantially understated their income for those years, and respondent’s burden of production under section 7491(c) has been met. Petitioner Juan Ramirez (petitioner) argued at trial that he was not aware that petitioners’ income tax liability was substantially understated on their returns for the years in issue, because he simply turned over all records to his accountant and paid what she told him to pay. The return preparer was not called as a witness at trial. Even if petitioners did not review their returns for the years in issue and relied blindly on the calculations of petitioner’s accountant, such course of action is not reasonable, especially in light of the substantial amounts of petitioner’s gross receipts in those years, petitioner’s business experience, and the large discrepancy between the tax liability reported and the tax liability actually owed. Petitioners have not met their burden of proving that they acted with reasonable cause and inPage: Previous 1 2 3 4 5 NextLast modified: March 27, 2008