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were those of petitioner’s real estate activity. For these
reasons, respondent is sustained in disallowing the claimed
deduction for other expenses.
Section 6651(a)(1) Addition to Tax
Respondent determined that petitioners were liable for an
addition to tax under section 6651(a)(1). Under section 7491(c),
the Commissioner has the burden of production in any court
proceeding with respect to the liability of any individual for a
penalty or addition to tax. Higbee v. Commissioner, 116 T.C.
438, 446-447 (2001). In order to meet this burden of production,
the Commissioner must come forth with sufficient evidence
indicating that it is appropriate to impose, as in this case, an
addition to tax for failure to file a timely return. Id. at 446.
Once the Commissioner has met this burden, the taxpayer must come
forward with evidence sufficient to persuade the Court that the
Commissioner’s determination is incorrect. Id. at 447.
Section 6651(a)(1) imposes an addition to tax for failure to
file a Federal income tax return by its due date, determined with
regard to any extension of time for filing previously granted.
The addition equals 5 percent for each month that the return is
late, not to exceed 25 percent. Sec. 6651(a)(1). An addition to
tax under section 6651(a)(1) is imposed for failure to file a
return on time unless the taxpayer establishes that the failure
was due to reasonable cause and not willful neglect. Sec.
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