- 24 -
embodied by the Settlement Agreement and quitclaim deed did not
take place.) This evidence satisfies respondent’s burden of
production under section 7491(c).
Petitioner contends that respondent’s determination to
impose the accuracy-related penalty due to negligence or
disregard of the rules or regulations is incorrect because the
position that she took on her 1997 and 1998 returns had a
reasonable basis. A return position that has a reasonable basis
is not attributable to negligence or disregard of the rules or
regulations. See sec. 1.6662-(3)(b)(1), (3), Income Tax Regs.
The reasonable basis standard is not satisfied, however, by a
return position that is merely arguable or that is merely a
colorable claim. See sec. 1.6662-3(b)(3), Income Tax Regs.; see
also Indeck Energy Servs., Inc. v. Commissioner, T.C. Memo. 2003-
101 (expressing that the reasonable basis standard was a standard
significantly higher than the “not frivolous” standard prior to
that standard’s being defined by an amendment to section 1.6662-
3(b), Income Tax Regs.).
Petitioner has presented neither persuasive evidence nor
authority justifying her rejection of the tax advice she received
prior to entering into the transactions with Mr. Walker and
Parker Development. Petitioner’s position on her 1997 and 1998
returns was based on an unwarranted assumption that she could
disavow the form of the transactions involving the Happy Valley
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011