- 14 -
1996) not previously deducted on their tax returns. Again, we
reiterate that petitioners have failed to provide this Court with
credible evidence for us to allow petitioners’ claims with
respect to the disallowed deductions. We therefore reject all of
petitioners’ contentions as to these issues.
II. Addition to Tax and Accuracy-Related Penalty
Under RRA 1998, Congress also enacted a provision, section
7491(c), requiring the Commissioner to carry the “burden of
production” in any court proceeding with respect to the liability
of any individual for any penalty, addition to tax, or additional
amount (penalties). Although the statute does not provide a
definition of the phrase “burden of production”, we conclude that
Congress’ intent as to the meaning of the burden of production is
evident from the legislative history. The legislative history of
section 7491(c) sets forth:
in any court proceeding, the Secretary must initially
come forward with evidence that it is appropriate to
apply a particular penalty to the taxpayer before the
court can impose the penalty. This provision is not
intended to require the Secretary to introduce evidence
of elements such as reasonable cause or substantial
authority. Rather, the Secretary must come forward
initially with evidence regarding the appropriateness
of applying a particular penalty to the taxpayer; if
the taxpayer believes that, because of reasonable
cause, substantial authority, or a similar provision,
it is inappropriate to impose the penalty, it is the
taxpayer’s responsibility (and not the Secretary’s
obligation) to raise those issues. [H. Conf. Rept.
105-599, supra at 241, 1998-3 C.B. at 995.]
Therefore, with regard to section 7491(c), we conclude that for
the Commissioner to meet his burden of production, the
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