Joseph John Martella - Page 7

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          did not satisfy the prerequisites under section 7491(a)(1) and              
          (2) for such a shift.                                                       
               The Commissioner bears the burden of production in any court           
          proceeding with respect to an individual’s liability for                    
          penalties or additions to tax.  Sec. 7491(c).  To meet this                 
          burden, the Commissioner must come forward with sufficient                  
          evidence indicating that it is appropriate to impose the relevant           
          penalty or addition to tax.  Higbee v. Commissioner, 116 T.C.               
          438, 446 (2001).  In instances where an exception to the penalty            
          or addition to tax is afforded upon a showing of reasonable                 
          cause, the taxpayer bears the burden of showing such cause.  Id.            
          at 447.                                                                     
               B.   Filing Requirement                                                
               The Code imposes a Federal tax on the taxable income of                
          every individual.  Sec. 1.  Gross income for the purposes of                
          calculating taxable income is defined as “all income from                   
          whatever source derived”.  Sec. 61(a).  This means that                     
          compensations for services, including fees, commissions, and                
          fringe benefits are considered sources of gross income.  Sec.               
          61(a)(1).  Every U.S. resident individual whose gross income for            
          the taxable year equals or exceeds the exemption amount is (with            
          enumerated exceptions not applicable here) required to make an              
          income tax return.  Sec. 6012(a)(1)(A).  Petitioner had gross               
          income totaling $8,976 from self-employment for 1998 and gross              

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