Walter J. & Virginia L. Ward, et al. - Page 13




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          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”.5  Swain v.                  
          Commissioner, 118 T.C. ___, ___ (2002) (slip op. at 9); see also            
          Higbee v. Commissioner, supra at 446.  If a taxpayer files a                
          petition alleging some error in the determination of the penalty,           
          the taxpayer’s challenge generally will succeed unless the                  
          Commissioner produces evidence that the penalty is appropriate.             
          Swain v. Commissioner, supra at ___ (slip op. at 12).  The                  
          Commissioner, however, does not have the obligation to introduce            
          evidence regarding reasonable cause or substantial authority.               
          Higbee v. Commissioner, supra at 446-447.                                   
               The Wards are deemed to have admitted certain facts--                  
          including the fact that the Wards, and not the trusts, are the              
          correct taxpayers to report the income and expenses of the                  

               5  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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