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appropriate to impose the relevant penalty.” Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). In instances where an
exception to the penalty or addition to tax is afforded upon, for
example, a showing of reasonable cause or substantial authority,
the taxpayer bears the burden of “[coming] forward with evidence
sufficient to persuade a Court that the Commissioner’s
determination is incorrect.” Id. at 447.
II. Additions to Tax
Section 6651(a)(1) imposes an addition to tax of 5 percent
per month or a fraction thereof up to a maximum of 25 percent for
failure to file a timely return unless it is shown that such
failure is due to reasonable cause and not to willful neglect.
Section 6651(a)(2) imposes an addition to tax of 0.5 percent per
month up to a maximum of 25 percent for failure to pay the amount
of tax shown on a return. The two penalties combined, however,
may not exceed 5 percent per month. See sec. 6651(c). Section
6654(a) imposes an addition to tax for underpayment of estimated
income tax by an individual taxpayer. That addition to tax is
computed by reference to four required installment payments of
the taxpayer’s estimated tax liability, each constituting 25
percent of the “required annual payment”. Sec. 6654(c)(1),
(d)(1)(A). For taxpayers whose adjusted gross income for the
preceding year was $150,000 or less, the “required annual
payment” is equal to the lesser of (1) 90 percent of the tax
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Last modified: November 10, 2007