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instruments reporting requirements and to conceal $54,000 in
income.
IV. Penalties and Addition to Tax
A. Burden of Production
The Commissioner bears the burden of production in any court
proceeding with respect to an individual’s liability for
penalties or additions to tax. Sec. 7491(c). To meet this
burden, the Commissioner must present “sufficient evidence
indicating that it is appropriate to impose the relevant penalty”
or addition to tax. Higbee v. Commissioner, 116 T.C. 438, 446
(2001). In instances where an exception to the penalty or
addition to tax is afforded because of substantial authority,
reasonable cause, or similar provisions, the taxpayer bears the
burden of proof with regard to those matters. Id. at 446-447.
B. Section 6651(a)(1) Addition to Tax
Section 6651(a)(1) imposes a 5-percent addition to tax for
each month or portion thereof a required return is filed after
the prescribed due date (including extensions), not to exceed 25
percent in the aggregate, unless such failure to file timely is
due to reasonable cause and not due to willful neglect. Although
not defined in the Code, “reasonable cause” is described by the
applicable regulations as the exercise of “ordinary business care
and prudence”. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.;
see also United States v. Boyle, 469 U.S. 241, 246 (1985).
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