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evidence indicating that it is appropriate to impose the relevant
penalty. Higbee v. Commissioner, supra.
Pursuant to section 6662(a), a taxpayer may be liable for a
penalty of 20 percent of the portion of an underpayment of tax
(1) due to negligence or disregard of rules or regulations or (2)
attributable to a substantial understatement of income tax. See
sec. 6662(b)(1) and (2); see also DeCleene v. Commissioner, 115
T.C. 457, 476 (2000). A substantial understatement of tax exists
if the amount of the understatement of tax exceeds the greater of
10 percent of the tax required to be shown on the tax return, or
$5,000. See sec. 6662(d)(1)(A).
Respondent has met his burden of production, because he has
shown that petitioner has mathematically understated her income
tax liability within the meaning of section 6662(d)(1)(A).
Once the Commissioner meets his burden of production, the
taxpayer must come forward with evidence sufficient to persuade
the Court that the Commissioner’s determination is incorrect.
Higbee v. Commissioner, supra at 446-447.
The accuracy-related penalty is not imposed with respect to
any portion of the understatement as to which the taxpayer acted
with reasonable cause and in good faith. See sec. 6664(c)(1).
The decision as to whether the taxpayer acted with reasonable
cause and in good faith depends upon all the pertinent facts and
circumstances. See sec. 1.6664-4(b)(1), Income Tax Regs.
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Last modified: May 25, 2011