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the return for a taxable year or (2) $5,000. See sec.
6662(d)(1).
Section 7491(c) provides that the Commissioner shall bear
the burden of production with respect to the liability of any
individual for penalties. If a taxpayer files a petition
alleging some error in the determination of the penalty, the
taxpayer’s challenge will succeed unless the Commissioner
produces evidence that the penalty is appropriate. Swain v.
Commissioner, 118 T.C. 358, 364 (2002). “The Commissioner’s
burden of production under section 7491(c) is to produce evidence
that it is appropriate to impose the relevant penalty”. Id. at
363; see also Higbee v. Commissioner, 116 T.C. at 446. The
Commissioner, however, does not have the obligation to introduce
evidence regarding reasonable cause or substantial authority.
Higbee v. Commissioner, supra at 446.
The evidence establishes that understatements for 1997 and
1998 exceed the greater of 10 percent of the tax required to be
shown on the returns for 1997 and 1998 or $5,000. Accordingly,
respondent has met his burden of production.
The accuracy-related penalty is not imposed with respect to
any portion of the underpayment as to which the taxpayer acted
with reasonable cause and in good faith. Sec. 6664(c)(1). The
decision as to whether the taxpayer acted with reasonable cause
and in good faith depends upon all the pertinent facts and
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