- 48 -
Section 6662(a) authorizes a 20-percent penalty to be
imposed on the portion of an underpayment of income tax
attributable to negligence or disregard of rules or regulations.
Sec. 6662(b)(1). Negligence “includes any failure to make a
reasonable attempt to comply with the provisions of * * * [the
Internal Revenue Code]”. Sec. 6662(c); see also Neely v.
Commissioner, 85 T.C. 934, 947 (1985) (stating that negligence is
the lack of due care or failure to do what a reasonable person
would do under the circumstances).
Section 6662(a) also authorizes the 20-percent penalty to be
imposed if there is a substantial understatement of income tax.
Sec. 6662(b)(2). A substantial understatement of income tax with
respect to an individual taxpayer exists if, for any taxable
year, the amount of the understatement for the taxable year
exceeds the greater of 10 percent of the tax required to be shown
on the return for the taxable year or $5,000, whichever is
greater. Sec. 6662(d)(1)(A).
Respondent bears the initial burden of production with
respect to petitioners’ liability for the section 6662 penalty,
in that respondent must first produce sufficient evidence to
establish that the imposition of the section 6662 penalty is
appropriate. Sec. 7491(c). If respondent satisfies his initial
burden of production, the burden of producing evidence to refute
respondent’s evidence and to establish that petitioners are not
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011