Robert L. and Brenda J. Tarter - Page 15

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         accuracy-related penalty is not applicable to any portion of an              
         underpayment to the extent that a taxpayer has reasonable cause              
         for that portion and acts in good faith with respect thereto.                
         See sec. 6664(c)(1).                                                         
              Respondent bears the burden of production with respect to               
         the accuracy-related penalty.  Sec. 7491(c).  To meet this burden            
         of production, respondent must produce sufficient evidence that              
         it is appropriate to impose an accuracy-related penalty.  Once               
         respondent has produced sufficient evidence, the burden of proof             
         is upon petitioners.  See Higbee v. Commissioner, 116 T.C. 438,              
         449 (2001).  Petitioners may carry their burden by proving that              
         with respect to their underpayment there existed reasonable cause            
         and they acted in good faith.  Sec. 6664(c)(1).                              
              Respondent has satisfied the burden of production in that               
         the record establishes that petitioners failed to substantiate               
         their claimed deductions.  Section 6001 imposes on petitioners a             
         duty to maintain books and records sufficient to support items               
         reported on their returns, and petitioners’ breach of that duty              
         is contrary to what a prudent and responsible taxpayer would have            
         done under the circumstances.  See sec. 1.6662-3(b)(1), Income               
         Tax Regs.  Further, petitioners have failed to persuade us that              
         their failure to maintain the requisite substantiation was                   
         excused by reasonable cause and good faith; therefore, we sustain            

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