- 9 -
understatement” exists if the understatement exceeds the greater
of (1) 10 percent of the tax required to be shown on the return
for a taxable year, or (2) $5,000. Sec. 6662(d)(1). The
understatement is reduced to the extent that the taxpayer (1) has
adequately disclosed facts affecting the tax treatment of an item
and there is a reasonable basis for such treatment, or (2) has
substantial authority for the tax treatment of an item. Sec.
6662(d)(2)(B).
Section 6664(c)(1) provides that no accuracy-related penalty
shall be imposed with respect to any portion of an underpayment
if it is shown that there was reasonable cause for such portion
and that the taxpayer acted in good faith with respect to such
portion. The decision as to whether the taxpayer acted with
reasonable cause and in good faith depends upon all the pertinent
facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
Section 7491(c) provides that the Commissioner shall bear
the burden of production with respect to the liability of any
individual for penalties. “The Commissioner’s burden of
production under section 7491(c) is to produce evidence that it
is appropriate to impose the relevant penalty”.6 Swain v.
Commissioner, 118 T.C. ___, ___ (2002) (slip op. at 9); see also
Higbee v. Commissioner, 116 T.C. 438, 446 (2001). If a taxpayer
6 We do not decide herein whether respondent would have met
his burden of production if he had not produced any evidence when
the taxpayer failed to appear for trial.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011