- 30 -
1992. Petitioners are not entitled to NOL carryforward
deductions in 1996 and 1997, except to the extent determined in
the notice of deficiency.
B. Addition to Tax and Penalties24
Respondent determined an addition to tax under section
6651(a)(1) for petitioners’ failure to file timely their 1997
return. Section 6651(a)(1) imposes an addition to tax in the
case of a failure to file a return on or before the specified
filing date.25 The taxpayer bears the burden of proving that the
failure to file the required return did not result from willful
24Under sec. 7491(c), the Commissioner has the burden of
production in any court proceeding with respect to the liability
of any individual for any addition to tax or penalty. However,
this provision applies only to those court proceedings which
arise in connection with examinations commencing after July 22,
1998. RRA 1998 sec. 3001(c), 112 Stat. 727. The examination for
petitioners’ 1996 taxable year commenced before July 22, 1998.
Thus, sec. 7491(c) is not applicable to that taxable year. With
respect to petitioners’ 1997 taxable year, there is no evidence
of record establishing when the examination commenced for that
taxable year, and petitioners make no argument on this issue with
respect to their 1997 taxable year. We hold that sec. 7491(c)
does not apply. Even if the examination of petitioners’ 1996 and
1997 taxable years commenced after the effective date of sec.
7491(c), respondent has presented sufficient evidence to show
that imposition of the addition to tax and penalties is
appropriate. See Higbee v. Commissioner, 116 T.C. 438, 446
(2001).
25The addition to tax is equal to 5 percent of the amount of
the tax required to be shown on the return if the failure to file
is not for more than 1 month. An additional 5 percent is imposed
for each month or fraction thereof in which the failure to file
continues, to a maximum of 25 percent of the tax. The addition
to tax is imposed on the net amount due. Sec. 6651(a)(1) and
(b); Pratt v. Commissioner, T.C. Memo. 2002-279.
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