- 33 - Respondent's determinations are presumed correct, and petitioner bears the burden of proving that the penalties do not apply. Rule 142(a); Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972). Section 6662(a) imposes a penalty in an amount equal to 20 percent of the portion of an underpayment of tax attributable to any substantial understatement of income tax. Sec. 6662(b)(2). An understatement of tax is substantial if it exceeds the greater of 10 percent of the tax required to be shown in the return or $5,000. Sec. 6662(d)(1)(A). No penalty under section 6662(a) is imposed, however, with respect to any portion of an underpayment if there was reasonable cause for such portion and the taxpayer acted in good faith with respect thereto. Sec. 6664(c)(1). Petitioner contends that there was reasonable cause for the tax treatment of the items at issue because the deductions claimed by Lakeview were based on the advice of a certified public accountant (C.P.A.). The determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all the relevant facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. A taxpayer may demonstrate reasonable cause if he can show that he relied in good faith on a qualified adviser after full disclosure of all necessary and relevant information. Jackson v. 12(...continued) event, petitioner’s claim of reasonable cause under sec. 6664(c)(1), discussed infra, would eliminate the negligence penalty under sec. 6662(b)(1) to the same extent as the penalty for substantial understatement under sec. 6662(b)(2).Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Next
Last modified: May 25, 2011