Paul E. Ballmer - Page 8

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          Commissioner, 268 F.3d 756 (9th Cir. 2001), affg. T.C. Memo.                
          1998-364; Kovacs v. Commissioner, 100 T.C. 124, 128 (1993), affd.           
          without published opinion 25 F.3d 1048 (6th Cir. 1994).  Finally,           
          $6,059 of the $7,128 petitioner received in Social Security                 
          benefits in 2001 is also gross income pursuant to section 86(a).            
          Petitioner may, however, deduct the attorney’s fees and                     
          litigation costs incurred in his litigation against the FTB as a            
          miscellaneous itemized deduction.                                           
          II. Additions to Tax                                                        
               Respondent determined that petitioner was liable for                   
          additions to tax under sections 6651(a)(1) and 6654(a).  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, the Commissioner must come forth with sufficient               
          evidence indicating that it is appropriate to impose an addition            
          to tax.  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 or an exception applies.  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, including                 
          extensions.  The addition equals 5 percent for each month that              

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