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Petitioner excluded all his income for the years in issue as
foreign source income on his returns, claiming that he had no
Federal tax liability and that he was entitled to refunds of all
taxes withheld during those years. If, for any year in issue,
the amount of gross income that petitioner failed to include as
required results in an understatement of income tax exceeding
$5,000, then petitioner is subject to the accuracy-related
penalty for a “substantial understatement” for that year. Sec.
6662(a) and (b)(2). If, however, the resulting understatement of
income tax does not exceed $5,000 for any of the years in issue,
then petitioner is not liable for the penalty under section
6662(a) unless that understatement is the result of petitioner’s
negligence or disregard of rules and regulations. Sec. 6662(a)
and (b)(1).
Petitioner argues that he was not negligent in preparing his
returns for the years in issue. Petitioner testified at trial
that he had reviewed several publications on the Internal Revenue
Service’s Web site to assist him in preparing his returns.
Petitioner’s testimony focused on his prior review of special
rates that transportation workers may use to calculate business
expense deductions, specifically meal expenses. However,
petitioner did not claim any deductions for expenses on his
returns for the years in issue. His testimony on this point
relates to his position at trial and on brief that he is entitled
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