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II. Addition to Tax and Penalty
Petitioner conceded underreporting certain amounts of
gambling income for 1999, 2000, 2001. See supra p. 16; see also
Petzoldt v. Commissioner, 92 T.C. at 683; Money v. Commissioner,
89 T.C. at 48. Even though we “upheld” the gambling loss
deductions Mr. Gagliardi claimed for 1999, 2000, and 2001--i.e.,
did not sustain respondent’s disallowance of the loss deductions
and concluded that petitioner substantiated the amounts of the
loss deductions respondent disallowed, on account of this
additional unreported income we must decide whether petitioner is
liable for additions to tax pursuant to section 6651(a)(1) for
2000 and 2001 and whether petitioner is liable for penalties
pursuant to section 6662(a) for 1999, 2000, and 2001.
A. Burden of Production: Section 7491(c)
Section 7491(c) provides that the Commissioner will bear the
burden of production with respect to the liability of any
individual for additions to tax and penalties. “The
Commissioner’s burden of production under section 7491(c) is to
produce evidence that it is appropriate to impose the relevant
penalty, addition to tax, or additional amount”. Swain v.
Commissioner, 118 T.C. 358, 363 (2002); see also Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). The Commissioner,
however, does not have the obligation to introduce evidence
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