Respondent contends that petitioners failed to prove that: (1) Mr. Merino performed more than half of his services in real property trades or businesses and *174 (2) Mr. Merino performed more than 750 hours of services in a real property trade or business. We agree. Petitioners presented no evidence of how many hours Mr. Merino spent at One Stop and Mona Vie. Clearly, the time spent at One Stop was significant as petitioner supervised between two and four employees, ran the business as president, processed and reviewed files and loans, and monitored finances. Because Mr. Merino failed to present evidence ^{62013 Tax Ct. Memo LEXIS 174">*182} of the time spent on non-rental-activity services, he failed to meet the first requirement of section 469(c)(7)(B). Because he failed to meet this requirement, the real estate rental activity is a passive activity and the limitation on losses applies.

Further, we find that petitioners failed to carry their burden of proof with respect to section 469(c)(7)(B)(ii). Mr. Merino's summary of hours is insufficient to substantiate the 750 hours requirement. A taxpayer may establish the 750 hours "by any reasonable means". Sec. 1.469-5T(f)(4), Temporary Income Tax Regs., 53 Fed. Reg. 5727 (Feb. 25, 1988). "Any reasonable means" does not require the *175 taxpayer to have contemporaneous records compiled daily. Id. Rather, the taxpayer may use methods including, but not limited to, "the identification of services performed over 2013 Tax Ct. Memo LEXIS 174">*183 a period of time and the approximate number of hours spent * * * based on appointment books, calendars, or narrative summaries." Id. For the purposes of section 469, "the regulations do not allow a postevent 'ballpark guesstimate.'" Moss v. Commissioner, 135 T.C. 365">135 T.C. 365, 135 T.C. 365">369 (2010) (citing Bailey v. Commissioner, T.C. Memo. 2001-296, and Goshorn v. Commissioner, T.C. Memo. 1993-578).

Mr. Merino acknowledged that he prepared the summary using his estimates and his memory as to how much time he spent on certain tasks with respect to the real estate rental activity. Unfortunately, we found Mr. Merino's summary to be less of an approximation and more of a "ballpark guesstimate". See Moss v. Commissioner, 135 T.C. 365">135 T.C. 369. In Bailey v. Commissioner, T.C. Memo. 2001-296, the taxpayer kept a calendar of visits to rental properties but did not track hours spent on rental activities. We rejected the taxpayer's narrative summary, which she reconstructed before trial, as not a "reasonable" means because it was uncorroborated and not reliable. T.C. Memo 2001-296, slip op. at 13. Mr. Merino credibly testified that he created the summary in 2007 or 2008 shortly after a flood destroyed his records. See Villarreal v. Commissioner, T.C. Memo. 1998-420, 1998 Tax Ct. Memo LEXIS 416">1998 Tax Ct. Memo LEXIS 416 at *1998 Tax Ct. Memo LEXIS 416">72013 Tax Ct. Memo LEXIS 174">*184 *176 ("When a taxpayer's records are lost or destroyed through circumstances beyond his control, he is entitled to substantiate deductions by reconstructing his expenditures through other credible evidence. Malinowski v. Commissioner, 71 T.C. 1120">71 T.C. 1120, 71 T.C. 1120">1125 (1979).").

Mr. Merino's summary was not created from contemporaneous documentation, but rather it is a postevent reconstruction from memory. Compare Pohoski v. Commissioner, T.C. Memo. 1998-17, slip op. at 13-14 (accepting the taxpayers' postevent narrative summary because it was compiled using contemporaneous records and was supported by credible testimony and other objective evidence), with Bailey v. Commissioner, T.C. Memo 2001-296, slip op. at 13 (rejecting the taxpayer's uncorroborated summary in part because she assigned hours to tasks "based solely on her judgment and experience as to how much time the activities must have taken her"). Mr. Merino's records are not contemporaneous; they must therefore be a "reasonable means" of establishing the extent of his participation and not a "postevent ballpark guesstimate". Moss v. Commissioner, 135 T.C. 365">135 T.C. 369; sec. 1.469-5T(f)(4), Temporary Income Tax Regs., supra.

Mr. Merino's estimates, however well meaning, 2013 Tax Ct. Memo LEXIS 174">*185 are unreliable and uncorroborated. For instance, we are skeptical that Mr. Merino on average: purchased and had delivered one appliance per month for at least one of his seven *177 properties; received a notice of violations of homeowners association rules requiring an hour of work at least once per week; or had a property with a problem that required a contractor every week.

Mr. Merino was unable to recall any specifics about any particular entry in his narrative summary or otherwise provide evidence as to the reliability of the summary. Furthermore Mr. Merino admitted an error in his chart, which improperly ascribed four hours of work per week to check writing when it should have been four hours per month. Correction of this error reduces the hours reported by 160 (i.e. (52 weeks x 4 = 208 hours claimed) minus (12 months x 4 = 48 actual hours) = 160 fictitious hours). Mr. Merino also counted all of his travel time when he went to visit his properties, including unrelated activities such as meals with friends and time spent sleeping. Finally, the summary does not clearly distinguish between or identify services Mr. Merino personally performed and services the Colorado management company 2013 Tax Ct. Memo LEXIS 174">*186 or the Nevada assistant may have performed.

On the basis of the facts and circumstances of the summary and the lack of any corroborating evidence, such as invoices or letters to and from the homeowners associations, other than Mr. Merino's self-serving testimony, we find that the summary does not fall within the regulation's "any reasonable means". *178 Seesec. 1.469-5T(f)(4), Temporary Income Tax Regs., supra; see also Hill v. Commissioner, T.C. Memo. 2010-200, slip op. at 13 (finding that the excessive hours claimed by the taxpayer on the noncontemporaneous reconstruction, relative to the tasks performed, diminished the credibility of the taxpayer's estimates), aff'd, 436 Fed. Appx. 410">436 Fed. Appx. 410 (5th Cir. 2011).

Petitioners also do not qualify for the limited exception under section 469(i). This section allows a taxpayer to take into account up to $25,000 of the passive activity loss attributable to rental real estate activity in which the taxpayer actively participated for the year. Sec. 469(i)(1). This $25,000, however, begins to phase out for a taxpayer with a modified adjusted gross income that exceeds $100,000. Sec. 469(i)(3)(A). The exception is completely phased out when the taxpayer's 2013 Tax Ct. Memo LEXIS 174">*187 modified adjusted gross income exceeds $150,000. Petitioners' modified adjusted gross income for the 2007 taxable year exceeds $150,000, and thus they cannot take advantage of this section.

Respondent bears the burden of production with respect to the section 6651(a)(1) addition to tax. Seesec. 7491(c); Higbee v. Commissioner, 116 T.C. 438">116 T.C. 438, 116 T.C. 438">446-447 (2001). 2013 Tax Ct. Memo LEXIS 174">*188 To meet this burden, respondent must produce sufficient evidence establishing that it is appropriate to impose the addition to tax. The burden of establishing that the failure to timely file their 2007 tax return was due to reasonable cause rather than willful neglect remains with petitioners. See Higbee v. Commissioner, 116 T.C. 438">116 T.C. 447.

As a general rule, "any person made liable for any tax * * * shall make a return or statement according to the forms and regulations prescribed by the Secretary." Sec. 6011(a). Returns for calendar year individual taxpayers are due on April 15 of the year following the tax year. Sec. 6072(a). If a taxpayer fails to file a return on time, section 6651(a)(1) imposes an addition to tax of 5% of the *180 tax required to be shown on the return for each month or fraction thereof for which there is a failure to file, not to exceed 25% in the aggregate. The penalty will not apply if the taxpayer shows that the failure is due to reasonable cause and not due to willful neglect. Sec. 6651(a)(1).

The parties do not dispute that petitioners requested and received an automatic extension, which extended the due date of the return to October 15, 2008. Sec. 6081(a). The 2013 Tax Ct. Memo LEXIS 174">*189 parties also do not dispute that respondent did not receive the return until March 14, 2010. Thus, respondent has met his burden of production. Petitioner consequently bears the burden of proving either timely filing or reasonable cause and lack of willful neglect. See Higbee v. Commissioner, 116 T.C. 438">116 T.C. 446. Petitioners presented no evidence on this issue. ⁸ We therefore hold for respondent on this issue.

Respondent also bears the burden of production for the determined penalty and must produce sufficient evidence establishing that it is appropriate to impose *181 the penalty. See id. However, the burden to establish that they acted with reasonable cause remains with petitioners. See 116 T.C. 438">id. at 447.

Section 6662(a) imposes an accuracy-related penalty equal to 20% of an underpayment of tax attributable to one of five causes specified in subsection (b). Respondent contends that petitioners 2013 Tax Ct. Memo LEXIS 174">*190 are liable for the penalty because of negligence or disregard of the rules or regulations or, alternatively, because the underpayment is due to a substantial understatement of income tax. Seesec. 6662(b)(1) and (2).

For the purposes of the penalty, "'negligence' includes any failure to make a reasonable attempt to comply with the provisions of this title". Sec. 6662(c). Under caselaw, "'Negligence is a lack of due care or the failure to do what a reasonable and ordinarily prudent person would do under the circumstances.'" Freytag v. Commissioner, 89 T.C. 849">89 T.C. 849, 89 T.C. 849">887 (1987) (quoting Marcello v. Commissioner, 380 F.2d 499">380 F.2d 499, 380 F.2d 499">506 (5th Cir. 1967), aff'g on this issue43 T.C. 168">43 T.C. 168 (1964) and T.C. Memo. 1964-299), aff'd, 904 F.2d 1011">904 F.2d 1011 (5th Cir. 1990), aff'd, 501 U.S. 868">501 U.S. 868, 111 S. Ct. 2631">111 S. Ct. 2631, 115 L. Ed. 2d 764">115 L. Ed. 2d 764 (1991). A substantial understatement of income tax in the case of an individual is (with certain modifications which do not apply in this case) an understatement of income tax that exceeds the greater of (1) 10% of the tax *182 required to be shown on the return for the taxable year or (2) $5,000. Sec. 6662(d)(1)(A).

There is an exception to the section 6662(a) penalty when a taxpayer can demonstrate that the taxpayer (1) had reasonable 2013 Tax Ct. Memo LEXIS 174">*191 cause for the underpayment and (2) acted in good faith with respect to the underpayment. Sec. 6664(c)(1). Regulations promulgated under section 6664(c) further provide that the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all pertinent facts and circumstances." Sec. 1.6664-4(b)(1), Income Tax Regs.

Reliance on the advice of a tax professional may, but does not necessarily, establish reasonable cause and good faith for the purpose of avoiding a section 6662(a) penalty. Sec. 1.6664-4(b)(1), Income Tax Regs.; see also United States v. Boyle, 469 U.S. 241">469 U.S. 241, 469 U.S. 241">251, 105 S. Ct. 687">105 S. Ct. 687, 83 L. Ed. 2d 622">83 L. Ed. 2d 622 (1985) (reliance on an accountant or attorney as to a matter of tax law may be reasonable); Canal Corp. v. Commissioner, 135 T.C. 199">135 T.C. 199, 135 T.C. 199">218 (2010) ("The right to rely on professional tax advice, however, is not unlimited."). To avoid liability for a section 6662(a) penalty based on reliance on a tax professional, a taxpayer must meet the following three requirements: "(1) The adviser was a competent professional who had sufficient expertise to justify reliance, (2) the taxpayer provided necessary and accurate information to the *183 adviser, and (3) the taxpayer actually relied 2013 Tax Ct. Memo LEXIS 174">*192 in good faith on the adviser's judgment." Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43">115 T.C. 43, 115 T.C. 43">99 (2000), aff'd, 299 F.3d 221">299 F.3d 221 (3d Cir. 2002); see also Charlotte's Office Boutique, Inc. v. Commissioner, 425 F.3d 1203">425 F.3d 1203, 425 F.3d 1203">1212 n.8 (9th Cir. 2005) (quoting with approval the above three-prong test), aff'g121 T.C. 89">121 T.C. 89 (2003). In addition, the advice must not be based on unreasonable factual or legal assumptions (including assumptions as to future events) and must not unreasonably rely on the representations, statements, findings, or agreements of the taxpayer or any other person. Sec. 1.6664-4(c)(1)(ii), Income Tax Regs.

Respondent has met his burden of production. He has shown that the understatement exceeds the greater of 10% of the tax required to be shown on the return or $5,000, and we therefore need not decide whether petitioners were negligent or disregarded rules or regulations. Petitioners bear the burden of proving a defense to the penalty. See Higbee v. Commissioner, 116 T.C. 438">116 T.C. 447. Petitioners failed to present any evidence at trial as to reasonable cause. ^{92013 Tax Ct. Memo LEXIS 174">*193} We therefore find for respondent on this issue.

*184 The Court has considered all of petitioners' contentions, argument, requests, and statements. To the extent not discussed herein, we conclude that they are meritless, moot, or irrelevant. To reflect the foregoing,

Decision will be entered for respondent.