- 5 -
II. Section 6662 Penalty
Under section 7491(c), respondent bears the burden of
production with respect to petitioner’s liability for the section
6662(a) penalty. This means that respondent “must come forward
with sufficient evidence indicating that it is appropriate to
impose the relevant penalty.” Higbee v. Commissioner, 116 T.C.
438, 446 (2001).
We conclude that respondent has met the section 7491(c)
burden of production with respect to the substantial
understatement penalty. As explained below, in this close case,
we ultimately find unavailing petitioner’s argument that he is
not liable for the accuracy-related penalty because he acted with
reasonable cause and in good faith by relying on his accountant
in failing to report $73,313.30 in wages for the 2002 taxable
year.
Subsection (a) of section 6662 imposes an accuracy-related
penalty on an underpayment of tax that is equal to 20 percent of
any underpayment that is attributable to a list of causes
contained in subsection (b). Among the causes justifying the
imposition of the penalty are (1) negligence or disregard of
rules or regulations and (2) any substantial understatement of
income tax. Section 6662(c) defines negligence as “any failure
to make a reasonable attempt to comply with the provisions of
this title.” “[D]isregard” is defined to include “any careless,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: November 10, 2007