Wilbur T. Hawks, Sr., and Betty W. Hawks - Page 8

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          D.   Whether Petitioners May Deduct Partnership Losses of $32,065           
               for 2001                                                               
               Petitioners contend that they may deduct partnership losses            
          of $32,065 for 2001.  We disagree.  There is no evidence to                 
          support petitioners’ partnership loss deduction for 2001.                   
          E.   Whether Petitioners Are Liable for the Accuracy-Related                
               Penalty                                                                
               Section 7491(c) places on the Commissioner the burden of               
          producing evidence that it is appropriate to impose additions to            
          tax.  To meet this burden, the Commissioner must produce evidence           
          showing that it is appropriate to impose the particular addition            
          to tax but need not produce evidence relating to defenses such as           
          reasonable cause or substantial authority.  Higbee v.                       
          Commissioner, 116 T.C. 438, 446 (2001); H. Conf. Rept. 105-599,             
          at 241 (1998), 1998-3 C.B. 747, 995.                                        
               Petitioners failed to keep records and substantiate their              
          deductions.  Petitioners offered no evidence to show that they              
          are entitled to NOLs or partnership losses or other claimed                 
          deductions.  Thus, respondent has met the burden of production,             
          and petitioners are liable for the accuracy-related penalty for             
          2000 and 2001.                                                              
          F.   Penalty for Frivolous Positions or Instituting Proceedings             
               Primarily for Delay Under Section 6673                                 
               Respondent moved at trial to impose a penalty under section            
          6673.  The Court may impose a penalty of up to $25,000 if the               
          position or positions asserted by the taxpayer in the case are              





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