Leigh Gill f.k.a. Tammy L. Gill - Page 9




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          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.                                    





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