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               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            
               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 in              

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Last modified: March 27, 2008