Douglas A. Gibson - Page 14

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          (1) due to negligence or disregard of rules or regulations, or              
          (2) attributable to any substantial understatement of income tax.           
          Sec. 6662(b).  The term “understatement” means the excess of the            
          amount of tax required to be shown on a return over the amount of           
          tax imposed which is shown on the return, reduced by any rebate             
          (within the meaning of section 6211(b)(2)).  Sec. 6662(d)(2)(A).            
          Generally, an understatement is a “substantial understatement”              
          when the understatement exceeds the greater of $5,000 or 10                 
          percent of the amount of tax required to be shown on the return.            
          Sec. 6662(d)(1)(A).  The term “negligence” in section 6662(b)(1)            
          includes any failure to make a reasonable attempt to comply with            
          the Internal Revenue Code and any failure to keep adequate books            
          and records or to substantiate items properly.  Sec. 6662(c);               
          sec. 1.6662-3(b)(1), Income Tax Regs.  Negligence has also been             
          defined as the failure to exercise due care or the failure to do            
          what a reasonable person would do under the circumstances.  See             
          Allen v. Commissioner, 92 T.C. 1, 12 (1989), affd. 925 F.2d 348,            
          353 (9th Cir. 1991); Neely v. Commissioner, 85 T.C. 934, 947                
          (1985).  The term “disregard” includes any careless, reckless, or           
          intentional disregard.  Sec. 6662(c).                                       
               B.  Burden of Production                                               
               The Commissioner has the burden of production with respect             
          to the accuracy-related penalty.  Sec. 7491(c).  To meet this               
          burden, the Commissioner must produce sufficient evidence                   

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