they are not.

(5) Are petitioners liable for each year at issue for the excise tax under section 4973(a) for excess IRA contributions? We hold that Ms. Whitehead is.

(6) Are petitioners liable for each year at issue for the accuracy-related penalty under section 6662(a)? We hold that they are.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found except as stated herein.

Petitioners, who at all relevant times were husband and wife, resided in Sumner, Washington, at the time the petition was filed.

Petitioners have three children, who were born in April

1993, June 1996, and July 2000, respectively.

Burien Nissan

At all relevant times, Burien Nissan, a corporation organized in the State of Washington, operated an automobile dealership located in Burien, Washington. At least during the years at issue, Mr. Whitehead was president of Burien Nissan. During each year at issue, Burien Nissan had current earnings and profits of at least $24,000.

61,200 8 51.0 Mr. Stanford 35,280 4 29.4 Mr. Whitehead 11,760 5 9.8 Mr. Watson 5,880 6 4.9 Mr. Buchner 5,880 7 4.9¹ The parties stipulated that Mr. Johnston owned 61,200 shares of Burien Nissan stock as of May 25, 1990. That stipulation is clearly contrary to the facts that we have found are established by the record, and we shall disregard it. See Cal-Maine Foods, Inc. v. Commissioner , 93 T.C. 181, 195 (1989). The record establishes, and we have found, that both Mr. Johnston and Jacque Johnston owned 61,200 shares of Burien Nissan stock as of May 25, 1990. (We shall refer to any individual who owned Burien Nissan stock as of May 25, 1990, or at any other time as stockholder.) Pursuant to the May 25, 1990 stock purchase agreement, Burien Nissan acquired an option to purchase over a 30-month period that began in June 1990 the 61,200 Johnston shares (the 61,200 remaining Johnston shares) that Mr. Johnston and Jacque Johnston continued to own after that agreement was effected. The purchase price for the 61,200 remaining Johnston shares under that option was $215,000. The May 25, 1990 stock purchase agreement required the stock certificate evidencing the 61,200 remaining Johnston shares of Burien Nissan stock to bear a legend (legend) indicating that those 61,200 shares were subject to Burien Nissan’s option to purchase set forth in that agreement. The May 25, 1990 stock purchase agreement provided that none of the individuals who acquired Burien Nissan stock pursuant to that agreement (i.e., Mr. Stanford, Mr. Whitehead, Mr. Watson, and Mr. Buchner) was to “sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to” any of the Burien Nissan stock owned by him without the prior written consent of Mr. Johnston and Jacque Johnston. That agreement required the stock certificates evidencing the Burien Nissan stock owned by Mr. Stanford, Mr. Whitehead, Mr. Watson, and Mr. Buchner, respectively, to bear a legend indicating that the sale or other disposition, or the granting of an option with respect to, such stock required the prior written consent of Mr. Johnston With respect to any disposition of Burien Nissan stock by any minority stockholder, the September 1, 1990 stockholders’ agreement incorporated by reference the provision in the May 25, 1990 stock purchase agreement which stated that no minority stockholder was to “sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to” any Burien Nissan stock owned by him without the prior written consent of Mr. Johnston and Jacque Johnston.

With respect to any disposition of Burien Nissan stock by a minority stockholder to a third party, in addition to the foregoing restriction requiring the prior written consent of Mr. Johnston and Jacque Johnston, the September 1, 1990 stockholders’ agreement did not permit any minority stockholder to sell less than all of his Burien Nissan stock to a third party. That agreement permitted a minority stockholder to sell all of his Burien Nissan stock to a third party only if he first offered such stock to the other minority stockholders, who had a right of first refusal to purchase such stock in proportion to their stock ownership in Burien Nissan.

In the event of a violation of any of the foregoing restrictions on the disposition of Burien Nissan stock, the September 1, 1990 stockholders’ agreement provided:

Any attempt to transfer Shares in violation of this

Agreement, or any involuntary or other purported transfer other than as provided in this Agreement, shall be void. If any Shares or transfer documents are presented to the Corporation to effect such attempted transfer, the Shareholder who owns such Shares shall immediately be deemed to be Terminated * * * and such Termination shall trigger the purchase rights of the other Shareholder[s] set forth in Section 3. * * * The purchase rights set forth in Section 3 of the September 1, 1990 stockholders’ agreement that were triggered upon a violation by a minority stockholder of any of the restrictions set forth in that agreement regarding the disposition by a minority stockholder of such stockholder’s Burien Nissan stock were that Burien Nissan, the other minority stockholders, and Mr. Johnston and Jacque Johnston, in that order, had a right of first refusal to purchase all of the stock of a terminated minority stockholder.

The September 1, 1990 stockholders’ agreement further required that the restrictions set forth in that agreement be reflected in an endorsement (endorsement) to appear on all Burien Nissan stock certificates. That endorsement stated: The shares of stock represented by this certificate are subject to the terms of a Shareholders’ Agreement dated as of September 1, 1990, which restricts or limits their transfer and limits the rights of the shareholder. A copy of the Agreement is on file at the office of the registered agent of the Corporation.

Burien Nissan experienced financial difficulties during 1990 and early 1991. On a date during 1991 not disclosed by the record, Mr. Stanford accepted an offer to manage a large automobile dealership in Hawaii. On September 13, 1991, Mr. Whitehead and Mr. Stanford entered into a stock purchase agreement (September 13, 1991 Whitehead/Stanford stock purchase agreement), pursuant to which Mr. Whitehead purchased on that date for $178,000 all 35,280 shares of Mr. Stanford’s Burien Nissan stock. That agreement provided that Mr. Whitehead was to pay the purchase price of $178,000 by delivering to Mr. Stanford a nonnegotiable promissory note. In the September 13, 1991 Whitehead/Stanford stock purchase agreement, Mr. Stanford represented and warranted to Mr. Whitehead the following: a. Stanford is the owner and registered holder of the Stanford Shares and holds the Stanford Shares free and clear of all liens, claims or encumbrances and subject to no options, warrants, contracts or agreements of any kind other than * * * [the May 25, 1990 stock purchase agreement] and * * * [the September 1, 1990 stockholders’ agreement].

b. Neither the execution and delivery of the Agreement by Stanford nor the consummation of the transactions contemplated herein, nor compliance with the terms and provisions hereof, will result in the creation or imposition of any lien, charge or encumbrance upon any of the Stanford Shares, or conflict in any way with the provisions of, or constitute a default under, or require the consent of any other party to, any loan agreement, indenture, mortgage, deed of trust, agreement, or other instrument to which Stanford or the Company is a party or by which it may be bound.

c. Neither the execution of this Agreement nor consummation of the sale of the Stanford Shares requires the approval or consent of any governmental authority having any jurisdiction over the Company’s business or of any party to any agreement with the Company or Stanford, other than such consents as have been previously obtained.

On September 13, 1991, Mr. Whitehead signed a promissory note (promissory note), pursuant to which he agreed to pay Mr. Stanford the principal amount of $178,000, plus interest in accordance with that note, in exchange for Mr. Stanford’s 35,280 shares of Burien Nissan stock. The promissory note provided that no principal payments were to be made under the note until the so-called option closing date, which was the date on which Burien Nissan completed its purchase pursuant to the option set forth in the May 25, 1990 stock purchase agreement of the 61,200 remaining Johnston shares of Burien Nissan stock. The promissory note further provided: (1) On a date that was three years after the option closing date, interest on the unpaid principal balance of the note was to begin to accrue, and (2) on a date that was eight years after the option closing date, the entire principal balance under the note was due and payable in full.

On a date not disclosed by the record, the sale on September

13, 1991, of Mr. Stanford’s 35,280 shares of Burien Nissan stock to Mr. Whitehead was recorded in Burien Nissan’s stock register. On September 13, 1991, Burien Nissan issued stock certificate 9 in the name of Mr. Whitehead, which evidenced his ownership of the 35,280 shares of Burien Nissan stock that he purchased from Mr. Stanford on that date.

On December 13, 1993, Burien Nissan, Mr. Johnston, Mr. McLaughlin, Mr. Whitehead, and Mr. Watson signed an addendum to the May 25, 1990 stock purchase agreement (addendum to the May 25, 1990 stock purchase agreement). Mr. Whitehead, as president of Burien Nissan, signed that addendum on its behalf. The addendum to the May 25, 1990 stock purchase agreement was executed “for the purpose of ratifying prior acts of the Shareholders and to approve the taking of certain acts in the future.” That addendum provided, inter alia:

1.1 Stanford has abandoned and assigned the entirety of his interest to Whitehead.

1.2 The stock held by Buchner in the amount of 5,880 shares shall be redeemed by the Company [Burien Nissan] for Thirty thousand DOLLARS ($30,000).

[1]

1.3 The net result of the above changes in stock ownership is the following:

SHAREHOLDER

SHARES

Don Johnston

[2]

61,200 Herbert Whitehead 47,040 Patrick Watson 5,880 --------Total 114,120 ========¹ At a time not disclosed by the record, Mr. Buchner was involved in an employment dispute with Burien Nissan. That dispute was resolved on or about Jan. 10, 1994. Pursuant to the resolution of the employment dispute between Mr. Buchner and Burien Nissan, on or about Jan. 12, 1994, Burien Nissan redeemed Mr. Buchner’s 5,880 shares of Burien Nissan stock for $10,217.² Although not altogether clear from the record, it appears that Jacque Johnston’s ownership interest in the 61,200 remaining Johnston shares was transferred to Mr. Johnston on a date not disclosed by the record. The addendum to the May 25, 1990 stock purchase agreement further provided, inter alia, that Burien Nissan was to redeem the 61,200 remaining Johnston shares for $434,677 and that Burien Nissan was to make that payment, as well as certain other payments, on January 3, 1994. Pursuant to that addendum, on January 12, 1994, Burien Nissan canceled Mr. Buchner’s 5,880 shares of stock as well as the 61,200 remaining Johnston shares. As a result of the addendum to the May 25, 1990 stock purchase agreement, as of January 12, 1994, the ownership of Burien Nissan stock was as follows:

Stockholder

Number of Shares Owned

Mr. Whitehead 47,040

Mr. Watson 5,880

On April 11, 1995, Burien Nissan began making monthly payments to Mr. Stanford in the amount of $2,000, which monthly payments continued until at least September 1999.

The assignment and assumption agreement provided, inter alia, the following:

RECITALS

A. Whitehead owns or controls one hundred percent (100%) of all the issued and outstanding stock of the corporation.

B. Whitehead acquired his stock in the corporation at various times and by various agreements, including that [1991 Whitehead/Stanford] Stock Purchase Agreement, with attached promissory note (hereinafter referred to as the “Agreement”) entered into with Kenneth R. Stanford (hereinafter referred to as “Stanford”) on September 13, 1991. * * * C. The terms of the Agreement are incorporated herein by reference as though fully set forth.

D. Whitehead wishes to assign his rights and responsibilities, as well as the benefits and burdens of the Agreement to the corporation.

E. The corporation wishes to acquire the rights and responsibilities, as well as the burdens and benefits of the Agreement from Whitehead by means of this Assignment.

F. Stanford is willing to consent to this Assignment. NOW, THEREFORE, in consideration of the mutual representations, covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the corporation and Whitehead hereby agree as follows:

I.

Assignment and Assumptions

1.1 Assignment of Rights . Whitehead hereby sells, assigns, and conveys to the corporation, and the corporation hereby purchases and assumes from Whitehead all of Whitehead’s right, title and interest in the Agreement under the terms of the Agreement.

1.2 Assumption of Liabilities . Also in consideration for the transfer of the Agreement, the corpora-tion agrees to assume from the date of the execution of this Assignment forward Whitehead’s obligations and liabilities under the terms of the Agreement.

1.3 Closing . All actions, transfers, conveyances and indemnities called for herein shall be effective as of the date hereinabove first written [March 10, 1996]. * * * * * * * III.

Representations and Warranties of Whitehead

3.1 Good Title . Whitehead represents and warrants to the corporation that there are no claims, liens or encumbrances which can lawfully be made against Whitehead with respect to the Agreement.

3.2 No Breach . Whitehead represents and warrants that the execution, delivery and performance by it of the terms and provisions of the Agreement and this Assignment will not conflict with or result in the breach of any terms, conditions or provisions of the Agreement.

3.3 Consent . Whitehead represents and warrants that, as evidenced by Sanford’s signature herein below, Whitehead has obtained the consent of Stanford, a party to the Agreement.

3.4 Guarantee . Whitehead agrees to guarantee that the corporation will perform under the terms of the Agreement, and indemnifies Stanford against default by the corporation under the terms of the Agreement. On March 10, 1996, Mr. Whitehead, as president of Burien Nissan, signed a document on its behalf that was entitled “ACTION BY BOARD OF DIRECTORS OF BURIEN NISSAN, INC. BY UNANIMOUS WRITTEN CONSENT”. Pursuant to that document, the Board of Directors of Burien Nissan (which that document stated consisted only of Mr. Whitehead) consented to the assignment and assumption agreement.

During the years at issue, neither Mr. Whitehead nor Ms. Whitehead owned an automobile. During each of those years, each petitioner had the use of, and did use, certain automobiles owned by Burien Nissan (Burien Nissan automobiles). During the years at issue, petitioners did not pay Burien Nissan for their respective uses of certain Burien Nissan automobiles.

The specific Burien Nissan automobiles that each petitioner used during the years at issue varied throughout those years. Neither petitioners nor Burien Nissan maintained records showing which Burien Nissan automobiles each petitioner used during those years. During the years at issue, Burien Nissan paid part of the fuel and maintenance costs for those Burien Nissan automobiles, and petitioners paid part of those costs.

Mr. Whitehead selected the specific Burien Nissan automobiles that Ms. Whitehead and he, respectively, used during the years at issue. The average value of the new Burien Nissan automobiles that Ms. Whitehead used during 1996 was $24,000. The average value of the new and used Burien Nissan automobiles that Mr. Whitehead used during 1996 was $18,000.

Neither petitioners nor anyone else prepared or maintained any document that purported to show either the amount or the purpose of Ms. Whitehead’s use of certain Burien Nissan automobiles during the years at issue. Mortgage Interest and Property Taxes During the years at issue, petitioners owned and resided on real property located at 2419 199th Avenue Court East, Sumner, Washington (Sumner property). During those years, Home Servicing of America (Home Servicing) held a mortgage loan on that property. During the years at issue, petitioners paid Home Servicing the following amounts for mortgage interest and property taxes During the years at issue, Colonial Mortgage Co. (Colonial Mortgage) held the mortgage loan on the Kirkland property. During those years, Essie Whitehead and Mr. Whitehead were jointly liable on that mortgage loan. Sometime during the first week of each month throughout the years at issue, Essie Whitehead made the monthly mortgage loan payment on the Kirkland property, which included payment of mortgage interest and property taxes, from checks that she drew on her own checking account.

During each month throughout 1996, except January, Ms. Whitehead signed and issued a check payable to Essie Whitehead that was drawn on petitioners’ joint checking account with SeaFirst bank (petitioners’ joint checking account). The total amount of those 11 checks was $6,600. None of those checks bore a notation as to their purpose. Essie Whitehead negotiated each of those checks.

During each month throughout 1997, except May, June, and

November, Ms. Whitehead signed and issued a check payable to

Essie Whitehead that was drawn on petitioners’ joint checking account. In addition to the check so issued to Essie Whitehead during each of the months March and October 1997, Ms. Whitehead Petitioners’ 1996 joint return also included Schedule SE. In that schedule, petitioners reported self-employment income attributable to Ms. Whitehead of $6,600.

In petitioners’ 1996 joint return, petitioners claimed, Petitioners’ 1997 joint return also included Schedule SE. In that schedule, petitioners reported self-employment income attributable to Mr. Whitehead of $6,600. Petitioners’ 1997 joint return included a statement in which petitioners described that As noted above, the record in this case does not establish the date on which the examination of petitioners’ taxable years at issue began. Moreover, neither party contends that sec. 7491(c) applies here.

Respondent also determined to disallow the deduction that petitioners claimed in their 1996 joint return for the $2,000 contribution made to Ms. Whitehead’s IRA during that year. Respondent made that determination because respondent determined that Ms. Whitehead did not receive any compensation during 1996. Respondent further determined that petitioners are liable for each of the years at issue for an excise tax of $120 under section 4973(a) for excess IRA contributions.

Respondent also determined that petitioners are liable for each of the years at issue for the accuracy-related penalty under section 6662(a).

OPINION

Petitioners bear the burden of proving that the determinations in the notice are erroneous.¹⁹ See Rule 142(a); Welch v.

Helvering

, 290 U.S. 111, 115 (1933). With respect to the deduc-Petitioners rely on certain testimonial and documentary evidence to support their positions with respect to the various issues in this case.

Testimonial Evidence

At trial, petitioners called themselves, Mr. Smith, and

Essie Whitehead as witnesses. With respect to the testimony of petitioners, based on our observation of each petitioner at trial, including our observation of each petitioner’s demeanor, we did not find either of them to be credible. We also found Mr. Whitehead’s testimony to be conclusory and/or uncorroborated by reliable evidence in certain material respects. While we found Ms. Whitehead’s testimony to be specific in certain respects, we found her testimony about certain material matters to be general, vague, and/or conclusory.

With respect to Mr. Smith’s testimony,²⁰ based on our obser-We have rejected the only argument that petitioners advance (i.e., that the September 13, 1991 Whitehead/Stanford stock purchase agreement was void or voidable) to establish error in the determinations of respondent that Mr. Whitehead received constructive dividends totaling $24,000 during each year at issue sation. Sec. 1.61-2(d)(1), Income Tax Regs. Such property or other services may take the form of fringe benefits, which include, inter alia, employer-provided automobiles. Sec. 1.6121(a)(1), Income Tax Regs. In the case of compensation paid in the form of a fringe benefit, an employee³¹ must include in gross income the amount by which the fair market value of the fringe benefit exceeds the sum of the amount, if any, paid for the benefit and the amount, if any, specifically excluded from gross income by, inter alia, section 132. Sec. 1.61-21(b)(1), Income Tax Regs.

Petitioners’ Position With Respect to Mr. Whitehead’s Use of

Certain Burien Nissan Automobiles During the Years at Issue

Petitioners contend that, in calculating the value of Mr. Whitehead’s use of certain Burien Nissan automobiles during the years at issue, they are entitled to exclude 50 percent of that value as a so-called working condition fringe under section 132(a)(3). That is because, according to petitioners, 50 percent of Mr. Whitehead’s use of certain Burien Nissan automobiles during those years constituted a business use of those automobiles. For purposes of section 132, the term “working condition fringe” means any property or services provided to an employee to the extent that, if the employee paid for such property or services, such payment would be allowable as a deduction under section 162 or section 167. Sec. 132(d). Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a). Section 167 allows a deduction for a reasonable allowance for the exhaustion, wear and tear, and obsolescence of property used in a trade or business or held for the production of income. Sec. 167(a). A particular payment otherwise allowable as a deduction under section 162 or section 167 is not allowable unless any applicable substantiation requirements of section 274 are satisfied. Sec. 1.132-5(a)(1)(ii), Income Tax Regs.

In the case of a taxpayer’s use of an employer-provided vehicle, in order to exclude from gross income as a working condition fringe under section 132(a)(3) any portion of the fair In order to meet the adequate records requirement, a taxpayer must maintain an account book, diary, log, or similar record, made at or near the time of the expenditure or use, which includes a written statement of business purpose (unless such business purpose is evident from the surrounding facts and circumstances) and sufficient information as to each element of every business use. Sec. 1.274-5T(c)(2)(i) and (ii), Temporary Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). As pertinent here, section 1.274-5T(c)(3)(ii), Temporary Income Tax Regs., 50 Fed. Reg. 46021 (Nov. 6, 1985), entitled “Sampling”, provides a method of substantiation that a taxpayer may use if the taxpayer does not maintain an adequate record within the meaning of section 274(d) and the regulations thereunder for the entire taxable year. That section provides that generally a taxpayer may meet the sufficient evidence requirement under section 274(d) and the regulations thereunder by maintaining an adequate record for a portion or portions of a taxable year and using that record to substantiate the business use of listed property for all of that year. However, the taxpayer must demonstrate by other evidence that the use for the portion or portions of the taxable year for which the adequate record is maintained is representative of the use for the taxable year (sampling method of substantiation). Sec. 1.274-5T(c)(3)(ii)(A), Temporary Income Tax Regs., 50 Fed. Reg. 46021 (Nov. 6, 1985). The sampling method of substantiation may not be used to substantiate the business use of an employer-provided automobile that is made available for use by more than one employee for all or a portion of a taxable year. Sec. 1.274-5T(c)(3)(ii)(B), Temporary Income Tax Regs., 50 Fed. Reg. 46021 (Nov. 6, 1985). Having set forth the pertinent law, we turn to whether, without regard to the requirements of section 274(d) and the regulations thereunder, petitioners have shown that any payment by them for Mr. Whitehead’s use of certain Burien Nissan automobiles during the years at issue would be allowable as a deduction under section 162 or section 167. Petitioners make no arguments or contentions with respect to that question. On the record before us, we find that petitioners have failed to show that, without regard to the requirements of section 274(d) and the regulations thereunder, any such payment would be allowable as a deduction under either of those sections.

Assuming arguendo that petitioners had shown that, without regard to section 274(d) and the regulations thereunder, any payment by them for Mr. Whitehead’s use of certain Burien Nissan automobiles during the years at issue would be allowable as a deduction under section 162 or section 167, see sec. 132(d), petitioners must nonetheless establish that they have satisfied the substantiation requirements of section 274(d) and the regulations thereunder. Petitioners have attempted to meet those substantiation requirements through the sampling method of substantiation. On the record before us, we find that petitioners have failed to show that they are entitled to use the sam-Assuming arguendo that petitioners had shown that Ms. Whitehead performed any services for Burien Nissan during the years at issue, we find on the record before us that petitioners have failed to show that Burien Nissan intended to, or did in On the record before us, we find that petitioners have failed to show that Burien Nissan permitted Ms. Whitehead to use certain Burien Nissan automobiles in order to compensate her for any services that she performed and not to compensate Mr. Whitehead for the services that he performed for Burien Nissan. We find on that record that the fair market value of Ms. Whitehead’s use of certain Burien Nissan automobiles during the years at issue constitutes a fringe benefit provided by Burien Nissan to Mr. Whitehead and is includible in petitioners’ income for those years as wages to Mr. Whitehead. See sec. 1.61-21(a)(4)(i), Income Tax Regs. On the record before us, we further find that petitioners have failed to establish that the fair market value of Ms. Whitehead’s use of certain Burien Nissan automobiles during the years at issue is equal to the value that they reported for such use in their joint return for each of those years.

Based on our examination of the entire record before us, we find that petitioners have failed to carry their burden of establishing error in the determinations of respondent to include in petitioners’ taxable income for 1996 and 1997 the net amounts of $5,850 and $6,600, respectively, as a result of petitioners’

The parties agree that the mortgage interest and property taxes at issue are attributable to the debt that Mr. Whitehead and Essie Whitehead incurred when they refinanced the Kirkland property in February 1994. The parties’ disputes are whether Mr. Whitehead paid any portion of the disallowed mortgage interest and property taxes and, if he did pay a portion of the mortgage interest at issue, whether that interest constitutes qualified residence interest under section 163(h)(3). Before turning to the contentions of the parties, we shall summarize the pertinent law.

Section 163(a) generally allows a deduction for all interest paid or accrued during the taxable year on indebtedness. In the case of a taxpayer other than a corporation, section 163(h) generally disallows any deduction for “personal interest”. The term “personal interest” is defined to mean any interest allowable as a deduction under chapter 1 of the Code other than, inter alia, any qualified residence interest. Sec. 163(h)(2)(D). The term “qualified residence interest” means any interest which is paid or accrued during the taxable year on, inter alia, acquisition indebtedness. Sec. 163(h)(3)(A). The term “acquisition indebtedness” is defined to mean any indebtedness which is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer and which is secured by such residence. Sec. 163(h)(3)(B)(i). The term “acquisition indebtedness” also includes any indebtedness secured by any qualified residence of the taxpayer resulting from the refinancing of acquisition indebtedness, but only to the extent that the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness. Id.

Section 164 allows a deduction for certain taxes, including real property taxes, paid or accrued during the taxable year.

Based on our examination of the entire record before us, we find that petitioners have failed to establish that they are entitled to a deduction for each year at issue for any mortgage interest and property taxes relating to the Kirkland property. Petitioners’ Claimed IRA Deduction Respondent determined to disallow the deduction that peti-Section 219 generally allows a deduction for contributions Section 4973(a) imposes an excise tax in an amount equal to 6 percent of the excess contributions to, inter alia, an IRA. Sec. 4973(a)(1). As pertinent here, the term “excess contributions” is defined to mean (1) the excess of the amount contributed for the taxable year to the IRA over the amount allowable as Accuracy-Related Penalty Under Section 6662(a)

Respondent determined that petitioners are liable for each year at issue for the accuracy-related penalty under section 6662(a) because of: (1) A substantial understatement of income tax under section 6662(b)(2) and (2) alternatively, negligence under section 6662(b)(1).

Section 6662(a) imposes an accuracy-related penalty equal to

20 percent of the underpayment of tax resulting from, inter alia, a substantial understatement of income tax, sec. 6662(b)(2), or negligence or disregard of rules or regulations, sec. 6662(b)(1). For purposes of section 6662(a), an 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 the tax return, sec. 6662(d)(2)(A), and is substantial in the case of an individual if it exceeds the greater of 10 percent of the tax required to be shown or $5,000, sec. 6662(d)(1)(A). For purposes of section 6662(a), the term “negligence” includes any failure to make a reasonable attempt to comply with the Code, and the term “disregard” includes any careless, reckless, or intentional disregard. Sec. 6662(c). Negligence has also been defined as a lack of due care or failure to do what a reasonable person would do under the circumstances. Leuhsler v. Commissioner , 963 F.2d 907, 910 (6th Cir. 1992), affg. T.C. Memo. 1991-179; Antonides v. Commissioner , 91 T.C. 686, 699 (1988), affd. 893 F.2d 656 (4th Cir. 1990).

The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends on the pertinent facts and circumstances, including the taxpayer’s efforts to assess his or her proper tax liability, the knowledge and experience of the taxpayer, and the reliance on the advice of a professional, such as an accountant. Sec. 1.6664-4(b)(1), Income Tax Regs. Reliance on the advice of a professional, such as an accountant, does not necessarily demonstrate reasonable cause and good faith unless, under all the circumstances, such reliance was reasonable and the taxpayer acted in good faith. Id.

In the case of claimed reliance on the accountant who prepared the taxpayer’s tax return, the taxpayer must establish that correct information was provided to the accountant and that the item incorrectly omitted, claimed, or reported in the return was the result of the accountant’s error. Ma-Tran Corp. v. Commissioner , 70 T.C. 158, 173 (1978).

On brief, petitioners contend that they had a reasonable basis for the positions that they took in their joint return for each of the years at issue, that they did not intentionally disregard any Code provisions in preparing each such return, that respondent determined to impose the accuracy-related penalty in On the record before us, we find that, in the event the computations under Rule 155 establish that there is an under-statement of tax for each year at issue as a result of our holdings in this case that exceeds the greater of 10 percent of the tax required to be shown in petitioners’ joint return for each such year or $5,000, see sec. 6662(d)(1)(A), petitioners have failed to show that there is no substantial understatement of tax under section 6662(b)(2) and (d). On that record, we further find that petitioners have failed to show that they were not negligent and did not disregard rules or regulations within the meaning of section 6662(b)(1), or otherwise did what a reasonable person would do, with respect to any portion of the underpayment for each year at issue. On the record before us, we also find that petitioners have failed to show that they acted with reasonable cause and in good faith with respect to any portion of the underpayment for each such year. See sec. 6664(c).

Based on our examination of the entire record before us, we find that petitioners have failed to establish error in respondent’s determinations that they are liable for each year at issue for the accuracy-related penalty under section 6662(a). We have considered all of the contentions and arguments of the parties that are not discussed herein, and we find them to be without merit and/or irrelevant.

To reflect the foregoing, the concessions of respondent, and the matters abandoned by petitioners, Decision will be entered under Rule 155 .