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C. Additions to Tax and Penalty
Section 7491(c) applies with respect to examinations that
are commenced after July 22, 1998, see Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(c), 112 Stat. 727, and places the burden of production on
the Commissioner to show that the imposition of an addition to
tax or penalty is appropriate. In his trial memorandum,
respondent acknowledged that section 7491(c) applies to the
instant case.8
Section 6651(a)(1) provides an addition to tax for a failure
to file a return on or before the specified filing date unless it
is shown that such failure is due to reasonable cause and not due
to willful neglect.9 Once the Commissioner meets his initial
burden of production to show that the addition to tax is
appropriate, the taxpayer bears the burden of proving his failure
to file timely the required return did not result from willful
neglect and that the failure was due to reasonable cause. Higbee
v. Commissioner, 116 T.C. 438, 447 (2001).
8Sec. 7491(c) was added to the Code by the Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
sec. 3001, 112 Stat. 726.
9The 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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