- 14 - Year Tax Reported Required Tax Understatement 1996 $700 $60,297 $59,597 1997 536 64,215 63,679 1998 4,463 34,987 30,524 1999 11,846 39,012 27,166 2000 9,673 22,534 12,681 The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for the taxpayer’s position and that the taxpayer acted in good faith with respect to that portion. Sec. 6664(c)(1); sec. 1.6664-4(b), Income Tax Regs. The determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all the pertinent facts and circumstances, the most important of which is the extent of the taxpayer’s effort to assess his proper tax liability for the year. Sec. 1.6664- 4(b)(1), Income Tax Regs. Circumstances that may indicate reasonable cause and good faith include an honest misunderstanding of law that is reasonable in light of all of the facts and circumstances. Sec. 1.6664-4(b), Income Tax Regs. While the Commissioner bears the burden of production under section 7491(c), the taxpayer bears the burden of proof with respect to reasonable cause. Higbee v. Commissioner, supra at 446. The mere fact that we have held against petitioner on the substantive issue does not, in and of itself, require holding for respondent on the penalty. See Hitchins v. Commissioner, 103 T.C. 711, 719-720 (1994) (“Indeed, we have specifically refused to impose * * * [a penalty] where it appeared that the issue wasPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011