Maria E. Magallon - Page 12

                                       - 11 -                                         
          comply with the provisions of the Internal Revenue Code,                    
          including any failure to keep adequate books and records or to              
          substantiate items properly.  See sec. 6662(c); sec.                        
          1.6662-3(b)(1), Income Tax Regs.  A “substantial understatement”            
          includes an understatement of tax that exceeds the greater of 10            
          percent of the tax required to be shown on the return or $5,000.            
          See sec. 6662(d); sec. 1.6662-4(b), Income Tax Regs.  The                   
          Commissioner bears the burden of production.  Sec. 7491(c).                 
               Section 6664(c)(1) provides that the penalty under section             
          6662(a) shall not apply to any portion of an underpayment if it             
          is shown that there was reasonable cause for the taxpayer’s                 
          position and that the taxpayer acted in good faith with respect             
          to that portion.  The determination of whether a taxpayer acted             
          with reasonable cause and in good faith is made on a case-by-case           
          basis, taking into account all the pertinent facts and                      
          circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.  The most             
          important factor is the extent of the taxpayer’s effort to assess           
          her proper tax liability for the year.  Id.                                 
               Petitioner had a substantial understatement of tax for 2002            
          because the understatement amount exceeded 10 percent of the tax            
          required to be shown on the return.  The Court concludes that               
          respondent has produced sufficient evidence to show that the                
          accuracy-related penalty under section 6662 is appropriate.                 
          Nothing in the record indicates petitioner acted with reasonable            






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011