- 41 -
T.C. 473, 489 (1972); Ellwest Stereo Theatres v. Commissioner,
T.C. Memo. 1995-610.
As previously indicated, section 7491(c) places the burden
of production on the Commissioner. The notice of deficiency
issued to petitioners asserted applicability of the section
6662(a) penalty on account of both negligence and/or substantial
understatement. See sec. 6662(b). Respondent in his pretrial
memorandum and on brief has focused on negligence or disregard of
rules or regulations as the basis for the penalties.
To the extent that we have ruled in petitioners’ favor, some
or all of the underpayments and corresponding penalties may have
been eliminated. However, to the extent that our rulings in
respondent’s favor and concessions by petitioners are shown after
Rule 155 computations to leave in place any portion of the
determined underpayments, the record in this case satisfies
respondent’s burden of production under section 7491(c) with
respect to negligence. The evidence adduced reveals a serious
dearth of adequate records and substantiation for many claimed
items. At the same time, petitioners inexplicably failed to
report various amounts expressly reported to them on Schedules K-
1. With this threshold showing, the burden shifts to petitioners
to establish that they acted with reasonable cause and in good
faith.
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011