Deborah Y. and Donald J. Everhart - Page 15

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          enacted by the Internal Revenue Service Restructuring and Reform            
          Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001(a), 112 Stat.            
          726, provides as follows:                                                   
                    SEC. 7491(c).  Penalties.--Notwithstanding any other              
               provision of this title, the Secretary shall have the burden           
               of production in any court proceeding with respect to the              
               liability of any individual for any penalty, addition to               
               tax, or additional amount imposed by this title.                       
          As previously stated, section 7491(c) is effective with respect             
          to court proceedings arising in connection with examinations                
          commencing after July 22, 1998.  RRA 1998 sec. 3001(c)(1), 112              
          Stat. 727.  There is no dispute that the examination in the                 
          present case commenced after July 22, 1998.                                 
               Section 6662(a) imposes a 20-percent penalty on the portion            
          of an underpayment attributable to any of various factors, one of           
          which is negligence or disregard of rules or regulations.  Sec.             
          6662(b)(1).  “Negligence” includes any failure to make a                    
          reasonable attempt to comply with the provisions of the Internal            
          Revenue Code, including failure to keep adequate books and                  
          records or to substantiate items properly.  Sec. 6662(c); sec.              
          1.6662-4(b)(1), Income Tax Regs.  Section 6664(c)(1) provides               
          that the penalty under section 6662(a) shall not apply to any               
          portion of an underpayment 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.  The             
          determination of whether a taxpayer acted with reasonable cause             






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