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Commissioner satisfies the section 7491(c) burden of production
by “[coming] forward with sufficient evidence indicating that it
is appropriate to impose the relevant penalty” but “need not
introduce evidence regarding reasonable cause, substantial
authority, or similar provisions.” Higbee v. Commissioner, 116
T.C. 438, 446 (2001). Rather, “it is the taxpayer’s
responsibility to raise those issues.” Id. Because, as will be
more fully detailed infra, respondent here has introduced
sufficient evidence to render the section 6662(a) penalty at
least facially applicable, the burden rests on petitioner to show
why it should not be applied.
B. Business Expense Deductions
Deductions are a matter of “legislative grace”, and “a
taxpayer seeking a deduction must be able to point to an
applicable statute and show that he comes within its terms.” New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); see also
Rule 142(a). As a general rule, section 162(a) authorizes a
deduction for “all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business”. An expense is ordinary for purposes of this section
if it is normal or customary within a particular trade, business,
or industry. Deputy v. du Pont, 308 U.S. 488, 495 (1940). An
expense is necessary if it is appropriate and helpful for the
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