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III. Penalty
A. General Rules
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 upon a showing of reasonable cause,
the taxpayer bears the burden of showing such cause. Id. at 446-
447.
B. Section 6662 Accuracy-Related Penalty
Pursuant to section 6662(a), a taxpayer may be liable for a
20-percent penalty on the portion of an understatement of income
tax attributable to, inter alia, negligence or disregard of rules
or regulations, or to a substantial underpayment of tax. Sec.
6662(a) and (b)(1) and (2). “Negligence” includes any failure to
make a reasonable attempt to comply with the provisions of the
Internal Revenue Code. Sec. 6662(c). The regulations
promulgated under section 6662 provide that negligence is
strongly indicated where “A taxpayer fails to make a reasonable
attempt to ascertain the correctness of a deduction, credit or
exclusion on a return which would seem to a reasonable and
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Last modified: March 27, 2008