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respondent has satisfied his burden of production, and
petitioners bear the burden of establishing the applicability of
the reasonable cause exception.
A penalty under section 6662(a) will not be imposed with
respect to any portion of the underpayment as to which the
taxpayer acted with reasonable cause and in good faith. Sec.
6664(c)(1). The decision as to whether a taxpayer acted with
reasonable cause and in good faith is made by taking into account
all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),
Income Tax Regs.
The regulations interpreting section 6664(c)(1) provide:
The determination of whether a taxpayer acted with
reasonable cause and in good faith is made on a case-by-case
basis, taking into account all pertinent facts and
circumstances. * * * Generally, the most important factor is
the extent of the taxpayer's effort to assess the taxpayer's
proper tax liability. Circumstances that may indicate
reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light
of all the facts and circumstances, including the
experience, knowledge and education of the taxpayer. * * *
[Sec. 1.6664-4(b)(1), Income Tax Regs.]
Petitioner emigrated to the United States more than 40 years
ago and earned a master's degree in business administration after
doing so. He was employed as an electrical engineer and manager
by Fluor Corporation for many years and has taught applied
economics.
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Last modified: May 25, 2011