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Commissioner must come forward with sufficient evidence
indicating that it is appropriate to impose the relevant penalty.
The legislative history to section 7491(c), however, also
discloses that the Commissioner need not introduce evidence
regarding reasonable cause, substantial authority, or similar
provisions. In addition, the legislative history indicates that
it is the taxpayer’s responsibility to raise those issues. We
therefore conclude that the taxpayer bears the burden of proof
with regard to those issues.
Finally, we note that Congress placed only the burden of
production on the Commissioner pursuant to section 7491(c).
Congress’ use of the phrase “burden of production” and not the
more general phrase “burden of proof” as used in section 7491(a)
indicates to us that Congress did not desire that the burden of
proof be placed on the Commissioner with regard to penalties.6
See sec. 7491(c). Therefore, once the Commissioner meets his
burden of production, the taxpayer must come forward with
evidence sufficient to persuade a Court that the Commissioner’s
determination is incorrect.
6 We note that sec. 6665(a)(2) provides that any reference
to tax shall be deemed also to refer to penalties. However, the
application of sec. 6665(a)(2) is limited by the language “Except
as otherwise provided in this title”. Considering that limiting
language of sec. 6665(a)(2), the reference in sec. 7491(a) to tax
liabilities imposed by subtitle A or B (whereas penalties are
imposed by subtitle F), and the structure of sec. 7491 as a
whole, we believe that Congress intended for sec. 7491(c) (and
not sec. 7491(a)) to apply to penalties.
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Last modified: May 25, 2011