- 8 -
understatement of income tax, the taxpayer is liable for a
penalty equal to 20 percent of that portion of the underpayment.
See sec. 6662(a) and (b)(2). A substantial understatement of
income tax consists of an understatement that exceeds the greater
of (1) 10 percent of the tax required to be shown on the return
for the taxable year or (2) $5,000. Sec. 6662(d)(1)(A). The
amount of the understatement will be reduced to the extent that
the taxpayer (1) had substantial authority for the tax treatment
of an item or (2) adequately disclosed in the return or in an
attached statement the relevant facts affecting the tax treatment
and had a reasonable basis for the tax treatment. Sec.
6662(d)(2)(B)(i) and (ii). In addition, section 6664(c)(1)
provides an exception to the section 6662(a) accuracy-related
penalty where the taxpayer shows reasonable cause for, and that
the taxpayer acted in good faith with respect to, any portion of
the underpayment. See also sec. 1.6664-4(a), Income Tax Regs.
Pursuant to section 7491(c), the Commissioner must produce
sufficient evidence indicating that imposition of the section
6662(a) accuracy-related penalty against an individual is
appropriate. Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
Respondent has met this burden of production. Petitioner now
must demonstrate that respondent’s determination is incorrect.
Id. at 447.
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011