Daniel and Kristen Panice - Page 5




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          evidence with the exception of stipulations of fact and                     
          accompanying exhibits submitted therewith.                                  
                                       OPINION                                        
          1.  Burden of Production                                                    
               Petitioners argue that section 7491(c) applies to place upon           
          respondent a burden of production as to the accuracy-related                
          penalty under section 6662(h).3  Section 7491(c) was added to the           
          Code by the Internal Revenue Service Restructuring and Reform Act           
          of 1998 (RRA), Pub. L. 105-206, sec. 3001(a), 112 Stat. 726,                
          effective for “court proceedings arising in connection with                 
          examinations commencing after” July 22, 1998.  RRA sec.                     
          3001(c)(1), 112 Stat. 727.  While the parties agree that the                
          Commissioner started examining TBS 90-1 before the effective date           
          of section 7491(c), the parties dispute whether the                         
          Commissioner’s examination of TBS 90-1 is the relevant                      

               3 Sec. 7491(c) provides:                                               
                    SEC. 7491(c).  Penalties.--Notwithstanding any                    
               other provision of this title, the Secretary shall have                
               the burden of production in any court proceeding with                  
               respect to the liability of any individual for any                     
               penalty, addition to tax, or additional amount imposed                 
               by this title.                                                         
          In order to satisfy that burden of production, the record must              
          establish that it is appropriate to impose the relevant penalty,            
          addition to tax, or additional amount.  See Higbee v.                       
          Commissioner, 116 T.C. 438, 446 (2001).  The burden of production           
          and proof remain on the taxpayer to establish that the penalty,             
          addition to tax, or additional amount does not apply because of             
          reasonable cause, substantial authority, or the like.  Id.; see             
          also H. Conf. Rept. 105-599, at 241 (1998), 1998-3 C.B. 747, 995.           






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