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of $6,145,315 is includable in W.C. Houchin Corp.’s gross income
for the 1998 taxable year.
II. Section 6662(a) Accuracy-Related Penalty
A. Burden of Production
Section 7491(c) provides that the Commissioner will bear the
burden of production with respect to the liability of any
individual for additions to tax and penalties. “The
Commissioner’s burden of production under section 7491(c) is to
produce evidence that it is appropriate to impose the relevant
penalty, addition to tax, or additional amount”. Swain v.
Commissioner, 118 T.C. 358, 363 (2002); see also Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner
has done so, the burden of proof is upon the taxpayer to
establish reasonable cause and good faith. Higbee v.
Commissioner, supra at 449. W.C. Houchin Corp. is not an
individual; accordingly, section 7491(c) does not apply to its
case. See NT, Inc. d.b.a. Natures Touch v. Commissioner, 126
T.C. 191 (2006); Beiner, Inc. v. Commissioner, T.C. Memo. 2004-
219.
B. Penalty Analysis
Pursuant to section 6662(a), a taxpayer may be liable for a
penalty of 20 percent on the portion of an underpayment of tax
(1) attributable to a substantial understatement of tax or (2)
due to negligence or disregard of rules or regulations. Sec.
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