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The Commissioner has the burden of production under section
7491(c) with respect to the liability of any individual for a
penalty imposed by the Internal Revenue Code and must come
forward with sufficient evidence indicating that it is
appropriate to impose the penalty. See Higbee v. Commissioner,
116 T.C. 438, 446-447 (2001). Because we have sustained, or
petitioners have conceded, every element of the deficiencies
determined for 1997 and 1999, each of which exceeds the greater
of 10 percent of the tax required to be shown on the return or
$5,000, respondent has met his burden of production with respect
to the penalties for substantial understatement in 1997 and 1999.
Once the Commissioner meets the burden of production, the
taxpayer must come forward with persuasive evidence that the
Commissioner's determination as to the penalties is incorrect or
that the taxpayer had reasonable cause or substantial authority
for his position. Id. at 447; sec. 1.6664-4, Income Tax Regs.
A penalty under section 6662(a) will not be 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); Higbee v. Commissioner, supra at 448. The decision
as to whether a taxpayer acted with reasonable cause and in good
faith is made by taking into account all the pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Relevant
factors include the taxpayer's efforts to assess his or her
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