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under section 6662(a), which provides that taxpayers may be
liable for a 20-percent penalty on the portion of an underpayment
of tax attributable to negligence or disregard of rules or
regulations or to a substantial underpayment of tax. Sec.
6662(a) and (b)(1) and (2). No penalty, however, is imposed
under section 6662 if there is reasonable cause for the
underpayment of tax and the taxpayer has acted in good faith.
Sec. 6664(c)(1).
Pursuant to section 7491(c), respondent bears the burden of
production with respect to the issue presented under section
6662. In order to meet respondent’s burden of production,
respondent must come forward with sufficient evidence indicating
that it is appropriate to impose the accuracy-related penalty.
Higbee v. Commissioner, 116 T.C. 438, 446 (2001). The burden of
proof remains with petitioner with respect to the
accuracy-related penalty that respondent determined in the
notice. See Rule 142(a); Welch v. Helvering, 290 U.S. at 115;
Higbee v. Commissioner, supra at 446-447.
It is respondent’s position that petitioners’ underpayment
for 2003 was attributable to: (1) Negligence or disregard of the
Code, and (2) a substantial understatement of tax. For purposes
of section 6662(b)(2), a substantial understatement is equal to
the excess of the amount of tax required to be shown in the tax
return over the amount of tax shown in such return, sec.
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