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on the return, or $5,000. Sec. 6662(d)(1)(A). As relevant
herein, an “understatement” is defined as the excess of the tax
required to be shown on the return over the tax actually shown on
the return. Sec. 6662(d)(2)(A).
The accuracy-related penalty does 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. Sec. 6664(c)(1); sec.
1.6664-4(b), Income Tax Regs.; see United States v. Boyle, 469
U.S. 241, 242 (1985). 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. Sec. 1.6664-4(b)(1), Income Tax Regs. The most
important factor is the extent of a taxpayer’s effort to assess
the taxpayer’s proper tax liability for such year. Id.
B. Burden of Production and Burden of Proof
By virtue of section 7491(c), the Commissioner has the
burden of production with respect to the liability of any
individual for any penalty. “[F]or the Commissioner to meet his
burden of production, the Commissioner must come forward with
sufficient evidence indicating that it is appropriate to impose
the relevant penalty.” Higbee v. Commissioner, 116 T.C. 438, 446
(2001). Once the Commissioner meets the burden of production,
the taxpayer must come forward with persuasive evidence that the
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Last modified: May 25, 2011