Richard Clarke Randall - Page 5

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          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.                                          

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Last modified: May 25, 2011