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III. Section 6662
Section 6662(a) imposes a 20-percent accuracy-related
penalty on the portion of any underpayment attributable to
negligence or disregard of rules or regulations. Sec. 6662(b).
The term “negligence” includes any failure to make a reasonable
attempt to comply with the provisions of the Internal Revenue
Code, including any failure by the taxpayer to keep adequate
books and records or to properly substantiate items. Sec.
6662(c); sec. 1.6662-3(b), Income Tax Regs. Section 7491(c)
provides that the Commissioner bears the burden of production
with respect to accuracy-related penalties. See Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
Petitioner reported expenses and deductions for medical
equipment without any documentation to show he purchased or
invested in the equipment. Additionally, petitioner reported his
share of KCP’s losses without providing documentation to
substantiate his purported basis in KCP.
Petitioner was an employee of the IRS for more than 17 years
and spent the majority of this time either auditing or
supervising the audits of taxpayers. He testified he was well
aware of his responsibility to provide documentation to
substantiate his expenses, deductions, and partnership basis, but
he failed to do so even after the Court ordered him to comply
with respondent’s request for production. Respondent has met the
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Last modified: November 10, 2007