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Accuracy-Related Penalty
Section 7491(c) imposes the burden of production in any
court proceeding on the Commissioner with respect to the
liability of any individual for penalties and additions to tax.
Higbee v. Commissioner, supra at 446; Trowbridge v. Commissioner,
T.C. Memo. 2003-164, affd. 378 F.3d 432 (5th Cir. 2004). In
order to meet the burden of production under section 7941(c), the
Commissioner must come forward with sufficient evidence
indicating that it is appropriate to impose the relevant penalty.
Higbee v. Commissioner, supra.
Pursuant to section 6662(a), a taxpayer may be liable for a
penalty of 20 percent of the portion of an underpayment of tax
(1) due to negligence or disregard of rules or regulations, or
(2) attributable to a substantial understatement of income tax.
See sec. 6662(b)(1) and (2); see also DeCleene v. Commissioner,
115 T.C. 457, 476 (2000). A substantial understatement of tax
exists if the amount of the understatement of tax exceeds the
greater of 10 percent of the tax required to be shown on the tax
return, or $5,000. See sec. 6662(d)(1)(A).
Respondent has met his burden of production, because he has
shown that petitioner has mathematically understated his income
tax liability within the meaning of section 6662(d)(1)(A).
Once the Commissioner meets his burden of production, the
taxpayer must come forward with evidence sufficient to persuade
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Last modified: May 25, 2011