§6664 — Definitions and special rules

485, 493 (2017), supplementing and overruling in part 147 T.C.

209(a) effectively overruled the holding in Rand v.

We overruled respondent's bjection because petitioners indicated that they were not offering that recitation for the truth of its content.

We overruled respondent's objection and admitted the appraisal.

Under section 6664(c)(1), the accuracy-related penalty does not apply “to any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.” All three statutes use the phrase “reasonable cause.” But section 6664(c)(1) refers to a taxpayer’s “good faith,” while secti

Rather, the only authorities petitioners cite are Code sections and Treasury regulations that are inapposite to the case at hand.

Commissioner Inapposite In this case we are not called upon to address whetherthe statute is clear on its face as to whether "the amount shown as the tax by the taxpayer on his return" takes into account the earned income tax credit, the additional child tax credit, or the recovery rebate credit.

The release gave the owner of the encumbered land the right to "Respondent also relies on other cases, each of which is factually distinguishable from this case.

Considering the facts and law, we find that neither ofthese reductions applies in this case 9 Pursuantto section 6664 c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) ad reasonable cause; and (2) acted in good faith.

Section 6664(c)(1) provides a reasonable cause defense to application of accuracy-related penalties . Pursuant to section 6664(c)(1), the accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment if the taxpaye r shows that there was reasonable cause for, and that he acted i n good faith with respect to, such portion .

We need not decide whether the Commissioner met his burden for the individual petitioners because they have established reasonable cause through good faith reliance on Mr.

We need not decide whether the Commissioner met his burden for the individual petitioners because they have established reasonable cause through good faith reliance on Mr.

We need not decide whether the Commissioner met his burden for the individual petitioners because they have established reasonable cause through good faith reliance on Mr.

We need not decide whether the Commissioner met his burden for the individual petitioners because they have established reasonable cause through good faith reliance on Mr.

We need not decide whether the Commissioner met his burden for the individual petitioners because they have established reasonable cause through good faith reliance on Mr.

The term "negligence" includes any failure to make a reasonable attempt to Because we hold that petitioner's expenditures for flight lessons were not ordinary and did not maintain or improve his skills as a commercial realtor, we need not decide whether those lessons qualify him for a new trade or business, thus making the expenditures nondeductible under sec.

6662(a) penalty for each year because of negligence, we need not decide whether they are liable for the penalties due to substantial understatements of income tax.

Section 6664 provides an exception to the imposition ofthe accuracy- related penalty ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

Section 6664 provides an exception to the imposition ofthe accuracy- related penalty ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

Section 6664 provides a defense to the underpayment penalty under section 6662.

Section 6664 provides an exception to the imposition ofthe accuracy- related penalty ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

Accordingly, we hold that petitioners are liable for the accuracy-relatedpenalties under section 6662(a) for their underpayments oftax for the 2009 and 2010 tax years.

Accordingly, we hold that petitioners are liable for the accuracy-relatedpenalties under section 6662(a) for their underpayments of tax for the years in issue.

Pursuant to section 6664(c)(1), no penalty shall be imposed under section 6662 with regard to any portion ofan underpayment ifit can be shown that there was reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.

Accordingly, we hold that petitioners are liable for the 7(...continued) 155 computations.

Pursuant to section 6664(c)(1), no penalty shall be imposed under section 6662 with regard to any portion ofan underpayment ifit can be shownthat there was reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.

Pursuant to section 6664(c)(1), no penalty shall be imposed under section 6662 with regard to any portion ofan underpayment ifit can be shownthat there was reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.

Accordingly, we hold that petitioner is liable for the accuracy-related penalty under section 6662(a)> for her underpayment oftax for the 2006 tax year.

Accordingly, we hold that petitioners are not entitled to a deduction for cost depletion.

Whetherthe accuracy-relatedpenalty is applied because ofnegligence or disregard ofrules or regulations or a substantial understatementofincome tax, section 6664 provides an exceptionto imposition ofthe accuracy-relatedpenalty if the taxpayer establishes thatthere was reasonable cause for the underpayment and that the taxpayer acted in good faith with respect to that portion.

Accordingly, we hold that petitioner is not liable for an accuracy-related penalty under section 6662(a).

Section 6664 provides an exception to the imposition ofthe accuracy- related penalty ifthe taxpayer establishes thatthere was reasonable cause for, and the taxpayer acted in good faith with respset to, the underpayment.

Pursuant to section 6664 (c) (2), there may be reasonable cause and good faith in the case of any underpayment attributable to a substantial or gross valuation over statement * * * with respect to charitable deduction property * * * [only if] "Pursuant to sec.

Pursuant to section 6664(c)(1), accuracy-relatedpenalties under section 6662 do not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause; and (2) acted in good faith.

Because we hold that the underpayments were attributable to negligence, we need - 22 - not address whether a substantial understatement of income tax exists for either or both of the years at issue.

We hold that the Brennans do not qualify for the section 6664 (d) reasonable cause exception:to the section 6662A penalty that was determined byi the IRS.

Accordingly, we hold that he is liable for the section 6662 (a) penalty insofar as the Rule 155 computations show a substantial understatement .of income tax.

Section 6664 provides that the accuracy-related penalty is not imposed with respect to any portion of an underpayment as to which the taxpayer acted with reasonable cause and in good faith.

Section 6664 provides an exception tos the imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith with respect to that portion.3 Sec.

Accordingly, we hold that petitioner 1s liable for a section 6662(a) accuracy-related penalty due to negligence or disregard of rules or regulations ." To reflect the foregoing, Decision will be entered under Rule 155.

Section 6664 provides an exception to the imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment .

Therefore, we hold that respondent has met his burden of production regarding the accuracy--related penalty pursuant to section 6662 (a) .

Section 6664 provides an exception to the imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment .

Section 6664 provides an exception to the imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause-for, and the taxpayer acted in good faith with respect to, the underpayment .

Section 6664 provides an exception to the imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith with respect to that portion .4 Sec.

Section 6664 provides a defense to the penalty if a taxpayer establishes that there was reasonable cause for the underpayment and that he acted in good faith .

21 Pursuant to section 6664(c)(1), no penalty under section 6662 shall be imposed "with respect to any portion of an underpayment if it is shown that._,there was.

- 10 - Section 6664 provides a defense to the accuracy-related penalty if a taxpayer establishes that there was reasonable cause for any portion of the underpayment and that he or she acted in good faith with respect to that portion .

Whether the accuracy-related penalty is applied because of negligence or disregard of rules or regulations, or a substantial understatement of income tax, section 6664 provides a defense if - 19 - a taxpayer establishes that there was reasonable cause for the underpayment and that he acted in good faith with respect to that portion .

Section 6664 provides a defense to the accuracy-related penalty if a taxpayer establishes that there was reasonable cause for any portion of the underpayment and that he acted in good faith with respect to that portion .

Statutory Conflicts Petitioner argues that even if we hold that the Secretary had authority to issue section 301 .6221-1T(c) and (d), Temporary Proced.

Section 6664 provides a defense to the accuracy-related penalty if a taxpayer establishes that there was reasonable cause for any portion of the underpayment and that he or she acted in good faith with respect to that portion .

Section 6664 provides a defense if a taxpayer establishes that there was reasonable cause for the underpayment and that she acted in good faith with respect to that portion .9 Sec .

Section 6664 provides a defense to the accuracy-related penalty if a taxpayer establishes that there was reasonable cause for any portion of the underpayment and that he or she acted in good faith with respect to that portion.

Whether the accuracy-related penalty is applied because of negligence or disregard of rules or regulations, or a substantial understatement of tax, section 6664 provides an exception to - 16 - imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith with respect to that portion.

Whether the accuracy-related penalty is applied because of negligence or disregard of rules or regulations, or a substantial understatement of tax, section 6664 provides an exception to imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith with respect to that portion.

Whether the accuracy-related penalty is applied because of negligence or disregard of rules or regulations, or a substantial understatement of tax, section 6664 provides an exception to imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith with respect to that portion.

Whether the accuracy-related penalty is applied because of negligence or disregard of rules or regulations, or a substantial understatement of tax, section 6664 provides an exception to imposition of the accuracy-related penalty if the taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith with respect to that portion.

45-P, which is the Revac appraisal. We overruled respondent’s objection and admitted the appraisal. After trial, respondent moved the Court to reconsider that ruling. We shall deny the motion since we are not relying upon the Revac appraisal to value the servitude and respondent does not object to its admission for purposes of determinations under sec. 6664.

ment that generated the penalty amounts subject to the levy notice and the NFTL filing. The District Court entered an order ofdismissal; the court explicitly declined to adjudicate any partner-level defenses, such as a reasonable cause defense under section 6664. The SO reviewed the District Court's order of dismissal and determined that notwithstanding the order's specific wording, petitioners could not raise the issue ofthe section 6662 penalty or their partner- level defense at the CDP hearin

8, 446 (2001). However, once the Commissioner has met the burden ofproduction, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalties are inappropriate because ofreasonable cause or substantial authority under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Considering the facts ofthe case, we find respondent has met his burden of production with respect to the accuracy-related penalties. Section 6662(a) and (b)(1) and (2) impos

It provides: "Ifany part of any underpayment oftax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent ofthe portion ofthe underpaymentwhich is attributable to fraud." Section 6664 contains certain defmitions and special rules applicable to the fraud penalty.

497, 508 (2010), we previously held that “Section 6664 is silent and ambiguous with respect to the issue before us; i.e., Congress has not directly addressed the meaning of the term ‘underpayment’ when a taxpayer has overstated withholding credits.” But in Feller the Court addressed the validity of a regulation that interpreted section 6664.

racy-related penalties apply in accordance with their terms. However, it contends that there is a partnership-level defense to the imposition ofthose penalties at the partner level because the partnership, SAS, meets the reasonable cause exception ofsection 6664. Pursuant to section 6664(c)(1), an accuracy-related penalty under section 6662(a) may not be imposed with respect to any portion ofan underpayment oftax for which SAS, through Mr. Schmidt's actions, had reasonable cause and acted in goo

6664 (c) (1); sec. 1.6664-4 (a), Income Tax Regs. Reasonable cause has been found when a taxpayer selects a competent tax adviser, supplies the adviser with all relevant information and, consistent with ordinary business care and prudence, relies on the adviser's professional judgment as to the - 26 - taxpayer's tax obligations. Sec. 6664(c)

6664 (c) (1); sec. 1.6664-4 (a), Income Tax Regs. Reasonable cause has been found when a taxpayer selects a competent tax adviser, supplies the adviser with all relevant information and, consistent with ordinary business care and prudence, relies on the adviser's professional judgment as to the taxpayer's tax obligations. Sec. 6664 (c) (1); Es

I suggest thát "responderit - 36 - finds the - statutory hook fo his regulatory innovation not in section 6664 (a) (1) (A) , whose plain meaning, as Judge Gustafson points out,- could hardly be clearer, but instead in section 6664 (a) (1) (B),. A. Section 6664 (a) (1) (B) , Not Section 6664 (a) (1) (A) , Turns the Key ,Section 6664 (a),(1) (A) plicates the operative language of section 6211(a) (1) (A) , the p rallel provision in the definition of deficiency ("the amount shown as the tax by the

Accordingly, the notices of deficiency determined fraud penalties under section 6663 based upon underpayments of income tax pursuant to section 6664 of $104,642, $75,584, $58,087, $78,214, $80,993, and $78,073 for 1992, 1993, 1994, 1995, 1996, and 1997, respectively.

Section 6664 supplies definitions for purposes ofapplying chapter 68, subchapter A, part II ofthe Code, which includes the fraud penalty. Where (as here) no "rebates" have been made, section 6664(a)(1) defines "underpayment" to mean the amount by which the tax imposed for the year (i.e., the correct amount oftax) exceeds the sum of"(A) the amount s

Section 6664 Reasonable Cause and Good Faith Exception Section 6664(c)(1) provides an exception to the imposition ofthe accuracy- related penalty ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment. Sec. 1.6664- 4(a), Income Tax Regs. The decision whether a taxpayer

Section 6664 Reasonable Cause and Good Faith Exception Section 6664(c)(1) provides an exception to the imposition ofthe accuracy- related penalty ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment. Sec. 1.6664- 4(a), Income Tax Regs. The decision whether a taxpayer

ioner, 116 T.C. 438, 446 (2001). Once the Commissioner has met the burden ofproduction, the taxpayerbears the burden ofproving that the penalty is inappropriate because ofsubstantial authority under section 6662(d)(2)(B)(i) or reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. On his 2009 tax return, petitioner reported tax due of$2,616. Before trial respondent contended that petitioner was required to report tax due of$10,900. However, respondent'

gbee v. Commissioner, 116 T.C. at 446. Once the Commissioner meets his "burden of production", however, the "burden ofproof" remains with the taxpayer, including the burden ofproving that the penalty is inappropriate because ofreasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446- 448. There is a substantial understatement ofincome tax for any taxable year if the amount ofthe understatement exceeds the greater of 10% ofthe tax required to be shown on the r

v. Commissioner, 116 T.C. 438, 446 (2001). However, once the Commissioner meets his burden ofproduction, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalty is inappropriate because ofreasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. There is a substantial understatement ofincome tax for any taxable year if the amount ofthe understatement ofincome tax for the taxable year exceeds the - 44 - greater of 10%

Accordingly, the Suns cannot use section 6664 to escape the accuracy-relatedpenalty under section 6662(a) for 2008 or 2009.

in good faith is made on a case-by-case basis, taking into account all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Petitionerhas the burden ofproving that the penalty is inappropriate because ofreasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446- 447. Petitionerhas failed to prove that the penalty is inappropriate because of reasonable cause. Accordingly, we sustain the section 6662(a) accuracy-related penalty for petitio

eral tax forms, as petitioner did when he reported withheldtaxes as estimated tax payments, does not show good-faith effort to reach the proper tax liability. Petitionerhas failed to prove that he acted with reasonable cause and in good faith under section 6664. We have consideredthe other arguments ofthe parties, but they are irrelevant, unsupported by the record or by authority, or without merit. To reflect the foregoing, Decision will be entered for respondent.

The only issue in left in dispute is whether 466, 541, and 6611 had section 6664 reasonable-cause-and-good-faithdefenses for the gross-valuation misstatementpenalty.

v. Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner meets his burden ofproduction, however, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalty is inappropriate because of reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. For individuals there is a substantial understatement of income tax for any taxable year ifthe amount ofthe understatement for the taxable year exceeds the greater of 10% oft

6664( )(1); Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446. Petitioner offered no argument or other evidence to show that there was reasonable cause for the deductions claimed and that he acted in good faith with respect to the underpayments. Respon ent's determination ofaccuracy-related penalties under section 6662(a) for 2006 and 2007

446 (2001). However, once the Commissioner has met the burden of production, the burden ofproofremains with the taxpayer, including the burden of proving that the penalties are inappropriate because ofreasonable cause or substantial authority under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Respondent has shown that petitioners improperly deducted expenses and NOL carrybacks associated with their participation in the ClassicStar breeding program. Considering thi

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

8, 446 (2001). However, once the Commissioner has met the burden ofproduction, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalties are inappropriate because ofreasonable cause or substantial authority under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. We find respondent has met the burden of production for the settlement proceeds, travel expenses, and rental receipts. Section 6662(c) defines negligence as including any fai

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

reasonable cause is a factual determination in which petitioner's efforts to assess the proper tax liability is ofcritical importance. See sec. 1.6664-4(b)(1), Income Tax Regs. We conclude that petitioner does not meetthe reasonable cause defense ofsection 6664. Construing petitioner's statement on briefthat he hired a tax return preparer to prepare the 2004 through 2007 returns to mean that he relied on the advice of one or more tax professionals," we conclude that petitioner did not establish

Reasonable Cause Exception Section 6664 (c) provides for an exception to the accuracy- related penalty where a taxpayer can demonstrate (1) reasonable cause for the underpayment and (2) that the taxpayer acted in good faith with respect to the ur.derpayment.

Regulationis promulgated under section 6664 (c) further provide that the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all- pertinent facts and circumstances;" Sec.

The determination of whether the taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all pertinent facts and circumstances - 16 - including the taxpayer's efforts to assess his or her proper tax liability. Sec. 6664 (c) (1); sec. 1.6664-4 (b), Income Tax Regs. Circumstance

Section 1.6664- 4 (b) (1), Income Tax Regs., incorporates a facts and circumstances test to determine whether the taxpayer acted with reasonable cause and in good faith. The most important factor is the extent of the taxpayer's effort to assess his proper tax liability. Id. - 19 - Petitioner has failed to explain her failure to

Section 6664 (c) provides for an exception to the accuracy- related penalty where a taxpayer can demonstrate (1) reasonable cause for the underpayment and (2) that the taxpayer acted in good faith with respect to the underpayment. Sec. 6664 (c) (1). The determination of reasonable cause and good faith "is made on a case-by-case basis, taking into a

W also conclu e that petitione a are not entitled to the reasonabl cause and g od fai h defense under section 6664 because they did not rely on heir a countant.

6664 (c.) (1); Higbee v. Commissioner, supra at 446. Whether a taxpayer acted with reasonable cause and in good faith with regard to an underpayment related to an item reflected on the return of a passthrough entity is determined "on the basïs of' all pertinent facts and circumstances, including- the taxpayer's own actions, as well as the acti

Section 1.6664- 4 (b) (1), Income Tax Regs., incorporates a facts and circumstances test to determine whether the taxpayer acted with reasonable cause and in good faith. The most important factor is the extent of the taxpayer's effort to assess his or her proper tax liability. Id. Petitioners provided no evidence that they acted

.section 6664 (d) ('2) (.A)-.. ., Because. petitioners have not .introduced cr.edible'evidence .with respect. to this issue , they are. not entitled~to shift the burden .of proof . See sec . 7491(a) .~ We.therefore-conclude that petitioners are not entitled to the' exception, under section 6664 (d)., ._ 13 - Petitioners argue-that "The assessment o

than they were entitled to in 2005. We conclude that petitioners neither acted with reasonable cause nor established their good faith reliance on the tax preparation software. Petitioners do - 14 - not qualify for the reasonable cause exception of section 6664. Therefore, we sustain respondent's determination that petitioners are liable for the accuracy-related penalty pursuant to section 6662 for 2006. We also sustain respondent's determination that petitioners are liable for the accuracy-rela

25 - of producing evidence to demonstrate reasonable cause under section 6664 .(c)(1) .

Petitioner argues that to impose penalties under section 6662 on partners without considering those partners’ partner-level reasonable cause defenses under section 6664 as required by the regulation violates the statutory scheme; therefore the regulation is invalid.

Because petitioners failed to prove they reasonably relie d on a competent tax professional, and because they failed to assert any other basis for relief, we hold that petitioners failed to prove that they had reasonable cause within the meaning of section 6664 ( c) . Therefore, we find petitioners are liable for accuracy-related penalties under section 6662(a) for the years at issue . In reaching our holdings, we have considered all arguments made, and, to the extent not mentioned, we conclude

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the underpayment and that the taxpayer acted in good faith . Sec . 6664(c) ; United States v. Boyle, 469 U.S . 241 (1985) . Whether a taxpayer acted with reasonable cause and - 76 - in good faith is a factual

Given the facts presented in this case, as well as petitioner' s honest and straightforward testimony, we are convinced that the reasonable cause and good faith provisions of section 6664 ( c)(1) are applicable here .

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the underpayment and that the taxpayer acted in good faith . Sec . 6664(c) ; United States v. Boyle, 469 U.S . 241 (1985) . Whether a taxpayer acted with reasonable cause and - 76 - in good faith is a factual

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the underpayment and that the taxpayer acted in good faith . Sec . 6664(c) ; United States v. Boyle, 469 U.S . 241 (1985) . Whether a taxpayer acted with reasonable cause and - 76 - in good faith is a factual

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the underpayment and that the taxpayer acted in good faith . Sec . 6664(c) ; United States v. Boyle, 469 U.S . 241 (1985) . Whether a taxpayer acted with reasonable cause and - 76 - in good faith is a factual

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the underpayment and that the taxpayer acted in good faith . Sec . 6664(c) ; United States v. Boyle, 469 U.S . 241 (1985) . Whether a taxpayer acted with reasonable cause and - 76 - in good faith is a factual

Section 6664 may provide a defense to the remainder-- under either the negligence or substantial understatement (cid:16)04t2heory--"if it is shown that there was a reasonable cause * * * and that the taxpayer acted in good faith." Sec. 6664(c)(1). The regulations issued under this section require that our analysis be conducted "on a case-by-case ba

In regard to the section 6664 exception, we find that petitioners did not act with reasonable cause and in good faith.

Under section 6664, an exception is provided to the imposition of a section 6662 accuracy-related penalty where a - 53 - taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith. Sec. 6664(c). The regulations provide that whether an understatement of tax is made in good faith and due to reason

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for any portion of the underpayment, and that the taxpayer acted in good faith. Sec. 6664(c); United States v. Boyle, 469 U.S. 241, 242 (1985). Whether a taxpayer has acted with reasonable cause and in good faith

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the understatement and that the taxpayer acted in good faith. See sec. 6664(c); see also United States v. Boyle, 469 U.S. 241, 242 (1985). Whether a taxpayer acted with reasonable cause and in good faith is a

6664 provides, in pertinent part, as follows: SEC. 6664. DEFINITIONS AND SPECIAL RULES. * * * * * * * (c) Reasonable Cause Exception.-- (1) In general.--No penalty shall be imposed under this part [part II, relating to accuracy-related and fraud penalties] with respect to any portion of an underpayment if it is shown that there was reasonable

Section 6664 provides an exception to the imposition of accuracy-related penalties if the taxpayer shows that there was reasonable cause for the understatement and that the taxpayer acted in good faith. See sec. 6664(c); see also United States v. Boyle, 469 U.S. 241, 242 (1985). Whether a taxpayer acted with reasonable cause and in good faith is a

prior to trial but introduced no evidence at trial to explain the omission.13 As to the underpayment attributable to this adjustment, therefore, petitioners have failed to prove that they acted with reasonable cause and in good faith as required by section 6664. The accuracy-related penalty as it relates to this adjustment is sustained. 13Although petitioners attempted to provide in their brief an explanation for their failure to report the commission income, they failed to introduce evidence t

at the accuracy-related penalty should not be imposed with respect to the HJA payments applied to the FirsTier note and - 39 - the Chevrolet debt because they had substantial authority for their position and that they were entitled to relief under section 6664. Respondent anticipated these arguments in his opening and reply briefs. Although we could treat Henry and Esther’s failure to address the accuracy-related penalties in their opening brief as a concession or abandonment of the issue, we de

1.6664-2(g), Example (3), Income Tax Regs. B. Fraudulent Intent The Commissioner must prove that a portion of the underpayment for each taxable year in issue was due to fraud. See Professional Servs. v. Commissioner, 79 T.C. 888, 930 (1982). The existence of fraud is a question of fact to be resolved from the entire record. See Gaje

6664 provides, in pertinent part, as follows: SEC. 6664. DEFINITIONS AND SPECIAL RULES. * * * * * * * (c) Reasonable Cause Exception.-- (1) In general.--No penalty shall be imposed under this part with respect to any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good

nd that the penalty be based on the specific tax required to be shown on the fraudulent return on the filing date. See majority op. p. 62. I disagree. The statutory classification of situations covered by the section 6663(a) penalty is contained in section 6664. Section 6664(b) provides that the accuracy-related and the fraud penalties of sections 6662 and 6663 “shall apply only in cases where a return of tax is filed”. Section 6664(b) specifically classifies the situations to which section 6663

al disregard. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. - 18 - Section 6664(c)(1) of the Internal Revenue Code provides a reasonable cause exception to the accuracy-related penalty. Petitioner argues that it is within the exception under section 6664. Petitioner argues that it held an honest and good faith belief about the deductibility of its unrecovered advances based on its reasonable reliance on MBS to ensure tax compliance. Petitioner also argues that it was unsophisticated in tax

25 Though the section 6662(a) penalty does allow for an exception in the case of a taxpayer who claimed a deduction reasonably and in good faith, see § 6664, the Featherses did not argue for this at trial or on brief.

Treasury Regulation § 1.6664-2(c)(1) interprets the definition of “underpayment” in section 6664 by stating that, for purposes of determining an underpayment, the amount shown as the tax by the taxpayer on his return is reduced by the excess of: (i) The amounts shown by the taxpayer on his return as credits for tax withheld under section 31 (relating to tax withheld on wages) .

ction by showing that Mr. Clemons failed to maintain sufficient records to substantiate the expenses underlying those deductions. Mr. Clemons argues that accuracy-related penalties should not apply because he acted reasonably and in good faith under section 6664. Section 6664(c)(1) provides that section 6662 penalties do not apply to any portion of an underpayment as to which the taxpayer acted with reasonable cause and in good faith. That determination depends on all the facts and circumstances

15 [*15] interprets the definition of “underpayment” found in section 6664 to include a taxpayer’s overstated credits for withholding.

- 36 - [*36] We have to ask at the start of this discussion how reliance on bookkeepers fits into section 6664’s defenses.

- 36 - [*36] We have to ask at the start of this discussion how reliance on bookkeepers fits into section 6664’s defenses.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

that petitioners thought their accountants had such expertise. * * * Blind reliance on the opinions ofaccountants given the facts ofthese cases is insufficient to show - 4 - [*4] that petitioners acted with reasonable cause and in good faith under section 6664. * * * Curcio v. Commissioner, slip op. at 56-57. The decisions in Curcio were entered in 2010. The taxpayers appealed to the Court ofAppeals for the Second Circuit. On August 9, 2012, the Court of Appeals affirmed our decisions and specif

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

- 63 - [*63] Our opinion in Graev III has not yet been tested on appeal, so out ofan abundance ofcaution we also consider one last issue--whether Greenberg and Goddard had section 6664 reasonable-cause-and-good-faith defenses for those gross-valuation misstatements.

16 T.C. 438, 446 (2001). However, once the Commissioner has met the burden ofproduction, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalties are inappropriate because ofreasonable cause and good faith under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Respondent has satisfied his burden ofproduction regarding the imposition ofthe accuracy-related penalty. Petitioner and intervenor's understatement of income tax for 2012 of

ofproving that the penalty is inappropriate, by demonstrating for example, that their position was supported by substantial authority under section 6662(d)(2)(B)(i) or that they had reasonable cause for the underpayment and acted in good faith under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Reasonable cause and good faith are determined on a case-by- - 16 - case basis, taking into account all pertinent facts and circumstances. Sec. 1.6664- 4(b)(1), Income Tax Re

gbee v. Commissioner, 116 T.C. at 446. Once the Commissioner meets his "burden of production", however, the "burden ofproof" remains with the taxpayer, including the burden ofproving that the penalty is inappropriate because ofreasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446- 448. There is a substantial understatement ofincome tax for any taxable year if the amount ofthe understatement exceeds the greater of 10% ofthe tax required to be shown on the r

penalty is inappropriate, by demonstrating for example, that his/her position was supported by substantial authority under section - 60 - [*60] 6662(d)(2)(B)(i) or that he/she had reasonable cause for the underpayment and acted in good faith under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Reasonable cause and good faith are determined on a case-by-case basis, taking into account all pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Respon

ent provides adequate interest on fixed rent if, disregarding any contingent rent-- (i) The rental agreement has no deferred or prepaid rent as described in § 1.467-1(c)(3); * * * - 26 - the penalty is inappropriate because ofreasonable cause under section 6664. S Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. There is a substantial understatement ofincome tax for any taxable year if the amount o the understatement for the taxable year exceeds the greater of 10% ofthe tax reqpired to

The only issue left in dispute is whether 436 had section 6664 reasonable-cause-and-good-faithdefenses for the gross-valuation misstatement penalty.

Accordingly, the Suns cannot use section 6664 to escape the accuracy-relatedpenalty under section 6662(a) for 2008 or 2009.

ommissioner, 116 T.C. 438, 446 (2001). However, once the Commissioner meets his burden of production, the burden of proof remains with the taxpayers, including the burden of proving that the penalty is inappropriate because of reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. There is a substantial understatement of income tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of 10% of the tax requir

The only issue left in dispute is whether Ohana has a section 6664 reasonable-cause-and-good-faithdefense.

* * The statutory notices ofdeficiency issued to petitioners included the civil fraud penalty under I.R.C. § 6663 [which was conceded after trial] and consequently raised the issue ofreasonable cause. Therefore, the defense ofreasonable cause under I.R.C. § 6664 (c) is not a new matter in the case and petitioners bear the burden ofproofin showing reasonable cause under I.R.C. § 6664(c). We have previouslyheld that, when a penalty is asserted as "new matter", the Commissioner has the burden to p

116 T.C. at 446. However, once the Commissionerhas met the burden ofproduction, the burden ofproof remains with the taxpayer, including the burden ofproving that the penalty is inappropriate because ofsubstantial authority or reasonable cause under section 6664. Seee Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-449. Since the July 6, 2008, distribution from petitionerhusband's rollover IRA and the July 31, 2008, distribution from petitioner wife's traditional IRA are fully - 23 - [*23]

16 T.C. 438, 446 (2001). Once the Commissioner meets his "burden ofproduction", however, the "burden ofproof" remains with the taxpayer, - 19 - [*19] including the burden ofproving that the penalty is inappropriate because of reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Mr. Hall and Mrs. Hall have failed to substantiate the car and truck expenses and travel expenses that respondent disallowed. They have failed to provide sufficient evidence t

- 20 - [*20] satisfy the reasonable cause defense for section 6664; however, reliance on a promoter can negate fraudulent intent for purposes ofsection 6663).

- 20 - [*20] satisfy the reasonable cause defense for section 6664; however, reliance on a promoter can negate fraudulent intent for purposes ofsection 6663).

Commissioner, 116 T.C. 438, 446 (2001). Once the Commissionermeets his "burden ofproduction", however, the "burden ofproof" remains with the taxpayer, including the burden ofproving that the penalty is inappropriate because of reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Respondent contends thatthe underpayment oftax for each year at issue is attributable to a substantial understatementofincome tax. There is a substantial understatement ofinc

Section 6664 has also, both before and after its amendment by the PPA, limited the availability ofthe reasonable cause exception in the case ofany underpayment attributable to a substantial or gross valuation overstatement with respect to 5For returns filed on or before August 17, 2006, a gross valuation misstatement existed ifthe claimed value was

* * The statutory notices ofdeficiency issued to petitioners included the civil fraud penalty under I.R.C. § 6663 [which was conceded after trial] and consequently raised the issue ofreasonable cause. Therefore, the defense ofreasonable cause under I.R.C. § 6664 (c) is not a new matter in the case and petitioners bear the burden ofproofin showing reasonable cause under I.R.C. § 6664(c). We have previouslyheld that, when a penalty is asserted as "new matter", the Commissioner has the burden to p

The only issue left in dispute is whether Ohana has a section 6664 reasonable-cause-and-good-faithdefense.

- 20 - [*20] satisfy the reasonable cause defense for section 6664; however, reliance on a promoter can negate fraudulent intent for purposes ofsection 6663).

T.C. at 446. However, once the Commissioner has met the burden ofproduction, the burden ofproof remains with the taxpayer, including the burden ofproving that the penalties are inappropriate because ofsubstantial authority or reasonable cause under section 6664. See.Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. On his tax return, petitioner reported a tax due of$2,616. Before trial, respondent contended that petitioner was required to report a tax due of$10,900. However, respondent'

Section 6664 reasonable cause Under section 6664(c)(1), fraud penalties do not apply to any portions ofthe underpayments oftax for which petitioner proves reasonable cause and good faith. Section 1.6664-4(b)(1), Income Tax Regs., interprets "reasonable cause" as: The determination ofwhether a taxpayer acted with reasonable cause and in good faith i

The decision as to whether a taxpayer acted with reasonable cause arid in go d faith is made on a case-by-case basis, taking into account all ofthe pertinent facts and circumstances. See sec. 1.6664-4(b)(1), Income Tax Regs. "Circumstances that may indicate reasonable cause and good faith include an honest misunderstanding offact o

. Commissioner, 116 T.C. 438, 446 (2001:. However, once the Commissioner has met the burden ofproduction, the burder ofproofshifts to the taxpayer, including the burden of proving that the penalties are inappropriate because ofreasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. - 23 - [*23] We find-that respondent has rnet the burden ofproduction in the light of petitioner's inability to substantiate the deductions he claimed. . Negligence is defmed

. . . . . . . . 49 3. Conclusion .......................................... 50 B. Section 6662(a) Penalty for Underpayment ofTax . . . . . . . . . . . . . . . 50 1. SubstantialUnderstatement ............................51 2. Reasonable Cause Under Section 6664 . . . . . . . . . . . . . . . . . . . . 51 C. Section 6651(f) Fraudulent Failure To File Addition to Tax for 2003 . 54 D. Section 6651(a)(2) and 6654 Additions to Tax for 2003 . . . . . . . . . . 55 1. Section6651(a)(2) ..................

. However, once the Commissioner has met the burden ofproduction, the burden ofproof remains with the taxpayer, including tl e burden ofproving that the penalty is - 18 - [*18] inappropriate because ofsubstantial authority or reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-449. Respondent contends that the section 6662 penalties for petitioner's 2007 and 2008 tax years arejustified on the basis ofsubstantial understatement of income tax." See sec. 66

s was made on the ground that tax imposed was less than the excess ofthe amount specified in paragraph (1) over the rebates previously made. The Secretary has promulgated section 1.6664-2, Income Tax Regs., to help clarify the term "underpayment" in section 6664. Section 1.6664-2(a), Income Tax Regs., states: The definition ofunderpayment also may be expressed as-- Underpayment= W - (X + Y - Z), where W = the amount ofincome tax imposed; X = the amount shown as the tax by the taxpayer on his ret

The only issue in left in dispute is whether 466, 541, and 6611 had section 6664 reasonable-cause-and-good-faithdefenses for the gross-valuation misstatementpenalty.

. . . . . . . . 49 3. Conclusion .......................................... 50 B. Section 6662(a) Penalty for Underpayment ofTax . . . . . . . . . . . . . . . 50 1. SubstantialUnderstatement ............................51 2. Reasonable Cause Under Section 6664 . . . . . . . . . . . . . . . . . . . . 51 C. Section 6651(f) Fraudulent Failure To File Addition to Tax for 2003 . 54 D. Section 6651(a)(2) and 6654 Additions to Tax for 2003 . . . . . . . . . . 55 1. Section6651(a)(2) ..................

The only issue in left in dispute is whether 466, 541, and 6611 had section 6664 reasonable-cause-and-good-faithdefenses for the gross-valuation misstatementpenalty.

was made on the ground that tax imposed was less than the excess of the amount specified in paragraph (1) over the rebates previously made. The Secretary has promulgated section 1.6664-2, Income Tax Regs., to help clarify the term “underpayment” in section 6664. Section 1.6664-2(a), Income Tax Regs., states: The definition of underpayment also may be expressed as— Underpayment = W - (X + Y - Z), where W = the amount of income tax imposed; X = the amount shown as the tax by the taxpayer on his r

6664 (c) (1) provides an exception frot the penalty determination with respect to any portion of an underpayment if the taxpayer shows that there was reasonable cause for such portion and that the taxpayer acted in good fait h with respect to such portion. Reliance upon the advice of a ta professional may establish reasonable cause and good fa

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

46 (2001). However, once the Commissioner has met the bur en of production, the burden of proof remains with the taxpayer, including the burden of proving that the penalties are inappropriate because of reasonable cause or substantial authority unde section 6664. See Rule 142(a);.Higbee v. Commissioner, supra at 446-447. Respondent has met the burden of production by showing that petitioners improperly deducted or failed to rëport $1.4 million contributed to the Millennium Plan and used the fund

. 438, 446 (2001). Once the Commissioner meets his burden ofproduction, however, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalty is inappropriate because of reasonable cause or substantial authority under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Respondent has met his burden ofproduction in that he has shown that Dr. and Mrs. White caused Diogenes to improperly deducthundreds ofthousands of dollars used to purchase c

Section 6664(c.)(1) provides an exception to the section 6662(a) accuracy-related penalty with respect to any portion ofan underpayment ifthe taxpayer shows thatthere was reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion. The determination of reasonable cause and good faith is made on a case-by

Respondent determined that the 40-percent accuracy-related penalty applies to petitioners' underpayment resulting from the disallowed losses reported for 1998.. Respondent determined that a 20-percent accuracy-related penalty applies on account of a disallowed loss and omitted income for 1999. < Petitioners deny that they were ne

The determination of whether a taxpayer acted with reasonable cause and good faith is made on a case-by-case basis, taking into account all pertinent facts and circumstances. Sec. 1.6664-4(b) (1), Income Tax Regs. Generally, the taxpayer's effort to assess the proper tax liability is the most important factor. Id. The taxpayer's

38, 446 (2001). HoweVer, once the Commissionerhas met the burden ofproduction, the burden.ofproofremains with the taxpayer, including the burden ofproving that the penalties are inappropriate because ofreasonable cause or substantial authority under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. .We find respondent has met the burden of production in the light ofpetitioners' inability to substantiate the deductions they claimed. Section 6662(c) defines negligence as

As to whether the taxpayer has a defense to the penalty, such as the reasonable cause-good faith exception, the taxpayer bears the burden of production and'burden of persuasion. Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). For other issues underlying the taxpayer's liability for the penalty, the IRS has the burden of pro

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

e v. Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner meets his burden ofproduction, however, the burden ofproofremains with the taxpayer, including the burden ofproving that the penalty is inappropriate because ofreasonable cause under section 6664. See Rule 142(a); Hiabee v. Commissioner, 116 T.C. at 446-447. There is a substantial understatement ofincome tax for any taxable year ifthe amount ofthe understatement for the taxable year exceeds the greater of 10% ofthe tax required t

We recognize that there is an exception to the penalty provided by section 6664 (c) where reasonable cause for the underpayment and good faith are shown to exist.

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

lowing pages, the evidence shows that many ofpetitioner's claimed deductions were obviously not permitted under the internal revenue laws. -12- [*12] including the burden ofproving that the penalty is inappropriate because of reasonable cause under section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. Respondent contends that the underpayments oftax are attributable to either negligence or substantial understatements ofincome tax. Respondent's contentions necessarily reflec

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

Section 1.6664- 4 (b) (1), Income Tax Regs., incorporates a facts and circumstances test to determine whether the taxpayer acted with reasonable cause and in good faith. The most important factor is the extent of the taxpayer's effort to assess his or her proper tax liability. Id. Petitioners provided no evidence that they acted

Their persistence in underreporting their tax liabilities after the notices of deficiency were sent and the:petitions were filed negates good faith within the " meaning of section 6664 (c) (1).

As to whether the taxpayer has a defense to the penalty, such as the reasonable cause-good faith exception, the taxpayer bears the burden of production and'burden of persuasion. Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). For other issues underlying the taxpayer's liability for the penalty, the IRS has the burden of pro

Regulationis promulgated under section 6664 (c) further provide that the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all- pertinent facts and circumstances;" Sec.

Regulationis promulgated under section 6664 (c) further provide that the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all- pertinent facts and circumstances;" Sec.

46 (2001). However, once the Commissioner has met the bur en of production, the burden of proof remains with the taxpayer, including the burden of proving that the penalties are inappropriate because of reasonable cause or substantial authority unde section 6664. See Rule 142(a);.Higbee v. Commissioner, supra at 446-447. Respondent has met the burden of production by showing that petitioners improperly deducted or failed to rëport $1.4 million contributed to the Millennium Plan and used the fund

Regulations promulgated under section 6664 (c) provide that the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all pertinent facts and circumstances". Sec. 1.6664-4 (b) (1), Income Tax Regs. Reliance on the advice of a tax professional may, but does not necessarily, establis

6664 (c) (1) (no penalty imposed if there was reasonable cause for tax return position and the taxpayer acted in good faith); Higbee v. Commissioner, supra at 446 (taxpayer has burden of proving reasonable cause and good faith; IRS does not have burden of production). The Williamses are therefore liable for the section 6662(a) penalty.· To ref

The issue for deci"sion is "whether petitioners had "reasonÀble "cau e under section 6664 (c) (1) for omitting $3.4 million of income from their joint 2006-Federal income tax retuèn.

-Section. 1 6664- 4(b) (1), Income Tax.Regs., incorporates a facts and circumstances test to determine whether the taxpayer acted. with reasonable cause and in good faith. The most important factor is the extent of the .taxpayer's effort to assess his or her proper tax liability. Id. a e . The taxpayer's reliance on the advice o

The taxpayer bears the burden of proving that it - 76 - meets the requirements for relief under the section 6664,(c) (1) reasonable cause exception.

The understatements therefore exceed the greater of 10 percent of the tax required to be shown on the return ($9,711 for 2004 and $14,040 for 2005) or $5,000 and constitute substantial understatements of income tax within the meaning of section 6662(d) (1) (A).

Section 6664 (c) (1) provides an exception to the accuracy- trelated penalty if it is shown that the taxpayer had reasonable cause and acted in good faith. Sec. 1.6664-4 (b) (1), Income Tax Regs. The decision as to whether the taxpayer acted with reasonable cause and good faith depends upon all the pertinent facts and circumstances. Higbee v. Commi

Regulations promulgated under section 6664 (c) provide that the determination of reasonable cause and good faith "is made on a case-by-case basis, taking into account all pertinent facts and circumstances". Sec. 1.6664-4(b)(1), Income Tax Regs. Respondent met his burden of production under both causes, and petitioners did not add

Section 6664 (c) (1) provides [that no penalty shall be imposed if there was reasonable cause for the underpayment and the taxpayer acted in good faith. The determination of whether a taxpayer acted with reasonable cause and in good faith depends upon the facts and circumstances. Sec..1.6664-4(b) (1), Income Tax Regs. Circumstances indicating that

Generally, section 6664 (c) (1) provides an exception to the section 6662(a) accuracy-related penalty with respect to any portion of an underpayment if the taxpayer shows that there was reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.

Section 6664 (c) (1) provides that the penalty under section 6662(a) shall not apply to any portion of an underpayment if it is shown that there was reasonable cause for the taxpayer's position and that the taxpayer acted in good faith with respect to that portion. The determination of whether a taxpayer acted with reasonable cause and in good fait

974 million basis in ,the distribution, which is significantly more than 40 percent of $1, 400, and was reduced by the FPAA to zero.7 Be ause Palmlund conceded the taxes related to the underly- ing trapsaction, the only remaining question is whether the 'part- nership has a section 6664 (c) reasonable cause/good faith de- fense--based upon reliance ori Garza and Turner & Stone--to the 40% gro s-valuation-misstatement penalty the Commissioner asserts under section 6662 (h) .

Steinshouer has not contested this assertion, and we accept that respondent has carried the burden of production regarding the addition to tax-under section 6664 for 2006.

The decision as to whether the taxpayer acted with reasonable cause and in good faith depends upon all the pertinent facts and circumstances. Sec. 1.6664- 4 (b) (1), Income Tax Regs. Circumstances indicating that a taxpayer acted with reasonable cause and in good faith include "an honest misunderstanding of fact or law that is re

1.6664-4, Income Tax Regs. The determination of whether a taxpayer acted in good faith is-factual. and made on a case-by-case basis. Sec. 1.6664-4 (b) (1), Income Tax Regs. Relevant factors for the Court to consider include the knowledge and·experience of the taxpayer and ·reliance on the advice of a qualified professional. Id.

6664 (c) (1); Higbee v. Commissioner, supra at 448. The - 15 - decision as to whether a taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all of the pertinent facts and circumstances. See sec. 1.6664-4 (b) (1), Income Tax Regs. Reliance on professional advice may constitute reasonable

The Commissioner bears the burden of production with respect to penalties. See sec. 7491(c). To meet this burden, he must produce evidence regarding the appropriateness of imposing the penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001); Raeber v. Commissioner, T.C. Memo. 2011-39. The taxpayer's concessions may be taken int

Such a showing depends on the facts and circumstances of each case and includes the knowledge and experience of the taxpayer and the reliance on the advice of a professional, such as an accountant. Sec. 1.6664-4 (b) (1), Income Tax Regs. Respondent has the burden of production pursuant to section 7491(c). To satisfy that burden,

. - 24 - However, once the Commissioner has met the burden of production, the burden of proof remains with the taxpayer, including the burden-of proving that the penalties are inappropriate because of reasonable cause or substantial authority under section 6664. See Rule 142(a) ; Higbee v. Commissioner, supra at 446-447. r Respondent has met the burden of production by showing that petitioners' failure to report gambling and interest income for the years in issue resulted in understatements of t

Van Wickler substantially understated his.income tax, section 6664 (c) (1) - provides that no penalty shall be imposed if there was reasonable cause for the underpayment and the taxpayer acted in good faith.

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

one of the grounds the IRS - asserted for the penalty is "stbstantial understatement of income - 30 - tax". Another is "negligence or disregard of rules and regulations". It is undisputed that Zhang had underpayments equal to the correct amounts of her deficiencies (which she has petitioned the Court to redetermine). Zhang argued that h

6664 (c) (1); Higbee v. Commissioner, supra at 448. The decision as to whether a taxpayer acted with r asonable cause and in good faith is made on a case-by-case basis, taking into account all of the pertinent facts and circumstances. See sec. 1.6664-4 (b) (1·), Income Tax Regs. Taxpayers may satisfy their burden of proof as to negligence by s

Respondent determined that one or more cf the referenced accuracy-related penalties apply with respect to the partnership adjustments for Rovakat's 2002 through 2004 taxable years. Respondent determined that the 40-percent accuracy-related penalty applies to the portion of any underpayment of tax attributable to the ordinary loss

Section 6664 (c) (1) provides an exception to the imposition of the accuracy-related penalty if the taxpayer establLshes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment. Sec. 1.6664-4 (a), Income Tax Regs. The determination of whether the taxpayer acted with reasonable cause and in good fa

6664 (c) (1); Higbee v. Commissioner, supra at 448. The decision vas to whether taxpayers acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all of the.pertinent facts and circumstances. See sec. 1.6664-4 (b) (1), Income Tax Regs. Petitioners did not provide any evidence that they relied on profe

Section 6664 (c) (1) provides that the accuracy-related penalty shall not apply to any portion of an underpayment if it ie shown that there was reasonable cause for the taxpayer' s posità on with respect to that portion and that the taxpayer acted in go d faith with espect to that portion.

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

The taxpayer bears the burden of proof with regard to those issues. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Petitioner has failed to show reasonable cause, substantial authority, or any other basis for reducing the penalties. Accordingly, we find petitioner liable for the section 6662 penalty for 2006 as commensurate wi

aestablish reasonable cause and góod faitha erithin the meanirgA of section 6664 (c)4 if thettaxpayer demonstrates that he or ,she reasonably relied in good "faith on the informedeadvice -of an in ependent professiona]: advisež as to theeproper tax treatment of an item.

6664 (a) defines an "underpayment" for purposes of section 6663 (with exceptions not here relevant) essentially as a "deficiency".as defined by section 6211., As applicable herein, that is. the amount by whic the tax imposed by the Internal Revenue Code«exceeds the amount shown as the tax by petitioner on his return b. The Parties' Argumen

Section 6664*(c);(1) provides that the penalty under section a 6662 (a) shall not apply to any portion of an underpayment- if its is shown that there was reasonable cause for the.

Section 6664 (c) (1) providese that the penalty under section 6662 (a) shall not apply to a y,portion of an underpayment if it is shown that there was reasonable cause for the taxpayer's position and that the,taxpayer acted;in good faith. with respect to. that portion. The;determ nation of whether.a.taxpayer acted with reasonable cause and in good

The decision as to whether the taxpayer acted with reasonable cause and in good faith depends upon all the pertinent facts and circumstances. Sec. 1.6664- 4 (b) (1), Income Tax Regs. Circumstances indicating that a taxpayer acted with reasonable cause and in good faith include "an honest misunderstanding of fact or law that is re

6664 (c) (1); sec. 1.6664-4(a), Income Tax Regs. The determination of whether a taxpayer acted with reasonable cause and in good faith depends on the pertinent facts and circumstances, including the taxpayer's efforts to assess his or her proper tax liability, the knowledge, experience and education of the taxpayer, and the .reliance on the ad

Section 6664 (a) defines an "underpayment" as: the amount by which any tax imposed by this title exceeds the excess of-- (1) the sum of-- (A) the amount shown as the tax by the taxpayer on his return, plus (B) amounts not so shown previously assessed (or collected without assessment), over . (2) the amount of rebates made. Section 1.6664-2(c) (1)

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

Section 6664 (a) defines an "underpayment" as: the amount by which any tax imposed by this title exceeds the excess of-- (1) the sum of-- (A) the amount shown as the tax by the taxpayer on his return, plus (B) amounts not so shown previously assessed (or collected without assessment), over . (2) the amount of rebates made. Section 1.6664-2(c) (1)

The taxpayer bears the burden of proving that it - 76 - meets the requirements for relief under the section 6664,(c) (1) reasonable cause exception.

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

Van Wickler substantially understated his.income tax, section 6664 (c) (1) - provides that no penalty shall be imposed if there was reasonable cause for the underpayment and the taxpayer acted in good faith.

6664 (c); Higbee v. Commissioner, supra at 446; Ruqqeri v. Commissioner, T.C. Memo. 2008-300. A taxpayer can establish that his failure to timely file was due to reasonable cause if he exercised ordinary business care and prudence and was nevertheless unable to file his return in time. United States v. Boyle, 469 U.S. 241, 246 (1985); Crocker

Under section 6664 (c) (1), an.accuracy-related penalty will not be imposed if we find that Warwick and the trading companies acted with reasonable cause and in good faith. We make this determination at the partnership level, taking into account the state of mind of the general partner. See New Millennium Trading, LLC v . Commissioner, 131 T..C. 275 (200

The only issue in dispute is whether 106 had a section 6664 reasonable-cause- and-good-faith defense for the gross-valuation misstatement.

2001) . However, once the Commissioner has met the burden of production , .the burden of proof remains with the taxpayer, including the burden of proving that the penalties are inappropriate because of reasonable cause or substantial authority under section 6664 . See Rule 142(a) ; Higbee v. Commissioner, supra at 446-447 . Respondent has met the burden of production . Respondent has shown that petitioners improperly. deducted tens of thousands of dollars . used. to purchase life insurance which

"reasonable cause" .for `purposes of section 6664 .in relevant part- as follows : .

provided petitioners with tax advice . The only evidence petitioners offer to prove that they relied on professional advice is the revised Forms 1099-R reported by Washington .Trust Bank and petitioners' accountant's signature on petitioners' Form 1040 . Petitioners have failed to prove that they acted with reasonable cause and in good faith under section 6664 . For the reasons explained above, Decision will be entered for respondent .

in goodfaith See sec 6664 (;c) (1 ) taxpayer acted with reasonable on -the-ipertinent facts and circumstances .

ually i expended for such items . ' Thus, we conclude that petitioner did not act with reasonable cause, nor has he established that ther e was-good faith reliance on his tax adviser. Petitioner does not qualify for the reasonable cause exception of section 6664 . Therefore, petitioner is liable for the accuracy-related penalty pursuant to section 6662(a) and (b)(1), in an amount to be recalculated after computation of the deficiency . To reflect the foregoing, Decision will be entered under Rul

Section 6664(c.) provides an exception to the accuracy- related penalty where there is reasonable cause for the underpayment and the taxpayer acted in good faith with respect to the portion of the underpayment for which there was-reasonable cause . Petitioners have failed to show reasonable cause for the underpayments on their returns, nor have the

,Petitioner does not dispute the substantial understatement but claims that he is entitled to relief under section 6664(c ) ,because of his alleged.

6662 (d) (1) (B) . The accuracy-related pénalty under section 6662(a) does not apply -to any portion of an underpayment if it -is shown" that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.- Sec. 6664 (c) (1) . The deteräin'ation of whether the taxpayer acted with reasonable cause ahd in good faith depends o the pertinent facts and circum- stances, including the taxpayer's efforts to assess such tax- payer's proper tax liability, the know

2001) . However, once the Commissioner has met the burden of production , .the burden of proof remains with the taxpayer, including the burden of proving that the penalties are inappropriate because of reasonable cause or substantial authority under section 6664 . See Rule 142(a) ; Higbee v. Commissioner, supra at 446-447 . Respondent has met the burden of production . Respondent has shown that petitioners improperly. deducted tens of thousands of dollars . used. to purchase life insurance which

`;Reasonable cause" for erroneously reporting one's tax liability, in the first instance (for purposes of section 6664 (c)) ;,is a very' different - thing from "reasonable cause" for challenged, the tax has been assessed, and payment has been'., demanded .

Section 6664 ( c)(1) is an exception to the section 6662(a) penalty : no penalty is imposed with respect to any portion of an underpayment if it is shown that there was reasonable cause therefor and the taxpayer acted in good faith. Section 1 .6664-4 (b)(1), Income Tax Regs ., incorporates a facts and circumstances test to determine whether the tax

Reasonable Cause and Good Faith Exception Under Section 6664(c ) No penalty may be imposed under section 6662 with respect to any portion of an underpayment if the taxpayer had reasonable cause for the tax treatment of such portion and the taxpayer acted in good faith with respect to such portion .

The regulations direct us to consider "all facts and circumstances" to decide whether Michael's reliance was reasonable and in good faith. - 85 - intelligent person to obtain expert advice) affg. in part and vacating in part, 108 T.C. 344 (1997). We consider it well established that a taxpayer has the right to minimize his tax liabi

- 7 - Section 6662 (b) provides that the accuracy-related penalty applies to the portion of any underpayment attributable to one or more of the five types of misconduct specified in that subsection .4 Section 6664 ( a) defines an underpayment as follows : SEC .

Petitioners argue that they are not liable for this penalty because they did not understate their Federal income tax. This is so, petitioners contend, because FSH Services was a - 29 - taxable entity separate from them and not a sham. We have, however, already held that FSH Services was a sham. Given the evidence presented, we con

Section 6664 ( c)(1) is an exception to the section 6662(a) penalty : no penalty is imposed with respect to any portion of an underpayment if it is shown that there was reasonable cause therefore and the taxpayer acted in good faith . Section 1 .6664-4 (b)(1), Income Tax Regs ., incorporates a facts and circumstances test to determine whether the t

Section 6664 (c)(1) provides that the penalty under section 6662 ( a) shall not apply to any portion of an underpayment if it is shown that there was reasonable cause for the taxpayer's position and that the taxpayer acted in good faith with respect to that portion .

Section 6664 (c)(1) provides that the penalty under section 6662 (a) shall not apply to any portion of an underpayment if it is shown that there was reasonable cause for the taxpayer's position and that the taxpayer acted in good faith with respect to that portion .

Section 6664 was also enacted, defining the term "underpayment" . Sections 6662(a) and 6664(a) provide, in pertinent part, as follows : SEC . 6662 . IMPOSITION OF ACCURACY RELATED PENALTY ON UNDERPAYMENTS . (a) Imposition of Penalty .--If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be

Section 6664 ( c)(1) provides that the accuracy-related penalty shall not be imposed with respect to any portion of an underpayment if it is shown that there was reasonable cause for - 16 - that portion and the taxpayer acted in good faith. with respect to that portion . The determination of whether a taxpayer acted with reasonable cause and in go

Under section 6664, an exception is provided to the imposition of a section 6662 accuracy-related penalty wherë a taxpayer establishes that there was reasonable cause for the understatement and that the taxpayer acted in good faith. Sec. 6664(c)(1). The determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case-by

Furthermore, petitioners have failed to prove their entitlement to relief under the section 6664 exception.

- 7 - Petitioner argues that, because the regulations to section 6664 were not issued until after he filed his 1989 Federal income tax return, the regulations cannot apply retroactively to establish that he had an underpayment.

ssed 9 Amount of rebates made 9 Balance - (32,743.85) Underpayment 74,596.49 1990 Tax imposed under subtit. A $5,725 Tax shown on the return ($20,275) Tax previously assessed -0- Amount of rebates made -0- Balance - (20,275) Underpayment 26,000 See sec. 6664; sec. 1.6664-2(g), Example (3), Income Tax Regs. B. Fraudulent Intent The Commissioner must prove that a portion of the underpayment for each taxable year in issue was due to fraud. See Professional Servs. v. Commissioner, 79 T.C. 888, 930 (

tend that the penalty be based on the specific tax required to be shown on the fraudulent return on the filing date. See majority op. p. 9. I disagree. The statutory classification of situations covered by the section 6663(a) penalty is contained in section 6664. Section 6664(b) provides that the accuracy-related and the fraud penalties of sections 6662 and 6663, "shall apply only in cases where a return of tax is filed". Section 6664(b) specifically classifies.the situations to which section 66

An addition to tax under section 6664 is mandatory unless one of the exceptions contained in that section applies.

Section 6664 defines "underpayment" 9 Petitioner has never asked to be relieved of the stipulation but instead argued that the stipulation merely combined the gross receipts of petitioner and No. 2. That is not correct. While petitioner did not cooperate during the pretrial period and has never submitted any substantiation for any amount of gross r

o invoke the reasonable cause exception of section 6664(c)(1). However, petitioners do not mention section 6664(c)(1) in their opening brief and, in their reply brief, state only: "the facts demonstrate that petitioners come within the provisions of I.R.C. § 6664 and are entitled to relief thereunder." Apparently, the facts that petitioners rely on are that "petitioners and their accountant clearly made a good faith effort to determine their true tax liabilities for the years at issue." Petition