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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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