- 31 - involving an analysis of the law and application of the law to relevant facts. Sec. 1.6662-4(d)(2), Income Tax Regs. There is substantial authority for the tax treatment of an item if at the time the return containing the item is filed or on the last day of the taxable year to which the return relates, the weight of the authorities supporting the treatment is substantial in relation to the weight of authorities supporting contrary treatment.17 Sec. 1.6662-4(d)(3)(i), (iv)(C), Income Tax Regs. It is the taxpayer's responsibility to establish he is not liable for the accuracy-related penalty imposed by section 6662(a). Rule 142(a); Tweeddale v. Commissioner, 92 T.C. 501, 505 (1989). Petitioners did not report any of the settlement proceeds they received in 1991. We have found that a portion of the proceeds is attributable to punitive damages and interest, which are taxable under section 61. Therefore, the burden is on petitioners to prove that there is substantial authority for their reporting position. Respondent pled in his answer that petitioners negligently failed to report any portion of the settlement payment as gross income for 1991 and, therefore, are liable for the section 6662 penalty for negligence or disregard of rules or regulations. See sec. 6662(b)(1). This is a new matter; the burden of proof is 17 Petitioners timely filed their return for calendar year 1991 on Oct. 15, 1992, and the return for their short taxable year 1992 on Mar. 15, 1993.Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Next
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