- 8 -
subsequent years to the extent he has capital gains, plus excess
losses of up to $3,000. Secs. 172(d)(2), 1211(b); see also Flora
v. Commissioner, T.C. Memo. 1965-64.
Respondent also determined accuracy-related penalties under
section 6662(a) for a substantial understatement of income tax on
petitioner’s income tax returns for the years in issue. Under
section 7491(c), respondent has the burden of production with
regard to penalties and must come forward with sufficient
evidence indicating that it is appropriate to impose the penalty.
Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
Under section 6662(a), a taxpayer may be liable for a
penalty of 20 percent on the portion of an underpayment of tax
due to any substantial understatement of income tax. Sec.
6662(b)(2). An understatement of income tax is “substantial” if
it exceeds the greater of 10 percent of the tax required to be
shown on the return or $5,000. Sec. 6662(d)(1)(A). The
understatement is reduced to the extent that the taxpayer (1) has
substantial authority for the tax treatment of the item or
(2) adequately disclosed his position and has a reasonable basis
for such position. Sec. 6662(d)(2)(B).
In this case, the understatement on petitioner’s returns
meets the section 6662(d)(1)(A) definition of “substantial”, so
respondent has met that burden of production. Petitioner has not
cited any substantial authority to support his argument that his
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011