Mark N. Wright and Erica Y. Wright - Page 28

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          instruments reporting requirements and to conceal $54,000 in                
          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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