- 7 -
meet this burden, the Commissioner must produce sufficient
evidence indicating that it is appropriate to impose the relevant
penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
Where an exception to the penalty is afforded upon a showing of
reasonable cause, however, the taxpayer bears the burden of
showing such cause. Id. at 447. The taxpayer still has the
burden of proving that the Commissioner’s determination of the
accuracy-related penalty is erroneous. Rule 142(a); INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering,
290 U.S. 111, 115 (1933); Higbee v. Commissioner, supra at 446-
448.
As relevant herein, section 6662(a) imposes a penalty equal
to 20 percent of any underpayment of tax that is attributable to
either (1) negligence or disregard of rules or regulations or (2)
a substantial understatement of income tax. See sec. 6662(a) and
(b)(1) and (2).
The term “negligence” includes any failure to make a
reasonable attempt to comply with the provisions of the internal
revenue laws. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax
Regs. The term “disregard” includes any careless, reckless, or
intentional disregard. Sec. 6662(c); sec. 1.6662-3(b)(2), Income
Tax Regs.
An understatement of income tax is “substantial” if it
exceeds the greater of 10 percent of the tax required to be shown
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011