- 5 -
any failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue Code. An “understatement” is
the excess of the amount of tax required to be shown on the
return for the taxable year over the amount of tax imposed which
is shown on the return, reduced by any rebate. Sec. 6662(d)(2).
A substantial understatement of income tax exists for any taxable
year for purposes of section 6662 if the amount of the
understatement for the taxable year exceeds the greater of 10
percent of the tax required to be shown on the return for the
taxable year or $5,000. Sec. 6662(d)(1)(A).
Respondent bears the burden of production under section
7491(c) and must come forward with sufficient evidence indicating
that it is appropriate to impose an accuracy-related penalty.
Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). Once
respondent has met this burden, the taxpayer must come forward
with persuasive evidence that the accuracy-related penalty does
not apply. Id. at 447. The taxpayer may establish, for example,
that part or all of the accuracy-related penalty is inapplicable
because it is attributable to an understatement with respect to
which the taxpayer acted with reasonable cause and in good faith.
Sec. 6664(c)(1). Whether a taxpayer acted as such is a factual
determination, sec. 1.6664-4(b)(1), Income Tax Regs., in regard
to which the taxpayer’s effort to assess the proper tax liability
is a very important consideration.
Page: Previous 1 2 3 4 5 6 Next
Last modified: May 25, 2011