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Section 7491(c)4 places on the Commissioner the burden of
producing evidence showing that it is appropriate to impose a
particular addition to tax. However, the Commissioner 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. To meet the burden of production under section 7491(c),
respondent must produce evidence showing that it is appropriate
to impose the accuracy-related penalty under section 6662(a).
Once respondent meets that burden, petitioner must, in order to
not be found liable for the addition to tax, produce evidence
sufficient to show that respondent’s determination is incorrect.
See Higbee v. Commissioner, supra at 447.
Respondent has produced evidence showing that imposition of
the accuracy-related penalty under section 6662(a) is appropriate
by showing that petitioners substantially understated their tax
for 1997 and 1998. Petitioners reported tax due on their income
tax returns of zero for 1997 and $769 for 1998. The amounts of
tax required to be shown were $16,771 for 1997 and $139,059
4 Sec. 7491(c) provides:
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.
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Last modified: May 25, 2011