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SEC. 7491(c). Penalties.--Notwithstanding any other
provision of this title, the Secretary shall have the
burden of production in any court proceeding with
respect to the liability of any individual for any
penalty, addition to tax, or additional amount imposed
by this title.
In order to satisfy his burden of production under section
7491(c), the Commissioner must produce evidence that it is
appropriate to impose the relevant penalty, addition to tax, or
additional amount (collectively, penalty). Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). However, section 7491(c)
does not require the Commissioner to introduce evidence regarding
reasonable cause, substantial authority, or similar provisions.
Id.; H. Conf. Rept. 105-599, at 241 (1998), 1998-3 C.B. 747, 995.
The conference report explained the respective obligations of the
Commissioner and a taxpayer under section 7491(c) as follows:
Further, the provision provides that, in any court
proceeding, the Secretary must initially come forward
with evidence that it is appropriate to apply a
particular penalty to the taxpayer before the court can
impose the penalty. This provision is not intended to
require the Secretary to introduce evidence of elements
such as reasonable cause or substantial authority.
Rather, the Secretary must come forward initially with
evidence regarding the appropriateness of applying a
particular penalty to the taxpayer; if the taxpayer
believes that, because of reasonable cause, substantial
authority, or a similar provision, it is inappropriate
to impose the penalty, it is the taxpayer’s
responsibility (and not the Secretary’s obligation) to
raise those issues.
H. Conf. Rept. 105-599, supra at 241, 1998-3 C.B. at 995.
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