T.C. Memo. 2015-247
UNITED STATES TAX COURT
MICHAEL TSEYTIN AND ELLA TSEYTIN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 354-12. Filed December 28, 2015.
Frank Agostino, Brian D. Burton, and Lawrence A. Sannicandro, for
petitioners.
Marco Franco, for respondent.
MEMORANDUM OPINION
SWIFT, Judge: Respondent determined a $30,478 deficiency in petitioners’
2007 Federal income tax and a $6,096 penalty under section 6662(a).
For purposes of calculating the amount or portion of the total $23,099,420
that Michael Tseytin (petitioner) received in cash in a corporate merger that is
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[*2] taxable to him under section 356(a)(1)(B), the two issues for decision are: (1)
whether petitioner is to be treated as the owner of the two blocks of stock involved
in the merger or whether he is to be treated with respect to one of the blocks of
stock merely as an agent or nominee and (2) if he is to be treated as the owner of
both blocks of stock, whether petitioner may subtract the $527,298 loss he realized
on one of the blocks of stock from the $17,324,565 gain to be recognized on the
other block of stock. We must also decide whether petitioner is liable for a
penalty under section 6662(a).
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for 2007, and all Rule references are to the Tax Court
Rules of Practice and Procedure. Respondent has conceded that under section
6015(f) petitioner Ella Tseytin has been relieved from joint and several liability for
the tax deficiency and penalty at issue.
Background
This case was submitted under Rule 122. The stipulated facts are so found.
At the time of filing the petition, petitioner resided in New Jersey.
In early 2007 and a number of prior years petitioner owned stock in US
Strategies, Inc. (USSI), a New Jersey corporation, which owned a majority (91%)
interest in two limited liability companies organized under the laws of the Russian
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[*3] Federation, which in turn owned and operated Pizza Hut and Kentucky Fried
Chicken franchises throughout the Russian Federation.
Archer Consulting Corp. (Archer), apparently an unrelated legal entity
organized under the laws of the British Virgin Islands, owned 250 shares (or 25%)
of the issued and outstanding shares of stock in USSI (Archer shares).
Petitioner owned the other 750 shares (or 75%) of the issued and
outstanding shares of stock in USSI (non-Archer shares) and had a zero tax basis
in the non-Archer shares.
Unidentified key employees of USSI’s two limited liability companies
owned a minority 9% stock interest in each of the two limited liability companies.
AmRest Holdings, NV (AmRest), a corporation unrelated to USSI and
organized under the laws of the Netherlands and the shares of which were publicly
traded on the Warsaw Stock Exchange, owned and operated Pizza Hut, Kentucky
Fried Chicken, Burger King, and Starbucks franchises throughout Central and
Eastern Europe.
In May 2007 USSI, AmRest, and petitioner agreed to the merger of USSI
into AmRest. The merger was to qualify as a tax-free reorganization under
sections 356 and 368(a), subject to the requirement of section 356(a)(1)(B)
regarding cash received in the merger.
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[*4] For the sole purpose of facilitating the transfer and merger of USSI into
AmRest, AmRest formed AmRest Acquisition Subsidiary, Inc. (AA Subsidiary),
as a wholly owned subsidiary of AmRest.1
In order to effect the transfer and merger, petitioner agreed to purchase the
Archer shares for $14 million and then to transfer to AmRest 100% of the shares
of stock in USSI for a total consideration that turned out to be worth
approximately $54 million.
Below we summarize further details regarding the USSI-AmRest merger,
the Archer shares, and the transfer of the USSI stock to AmRest.
Merger Agreement
On May 20, 2007, USSI, AmRest, and petitioner entered into the Agreement
and Plan of Merger (AmRest agreement). The AmRest agreement provided that
“USSI shall be merged into * * * [AmRest] and the separate existence of USSI
shall thereupon cease.”
In article 5.4(d) of the AmRest agreement petitioner warranted that before
the merger he would hold of record and own beneficially all 1,000 shares of USSI
1
In this opinion and for convenience, hereinafter we ignore AA Subsidiary,
and we treat the merger as between USSI and AmRest.
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[*5] stock free and clear of any restrictions on transfer, contracts, commitments,
equities, claims, or demands.
Under additional terms of the AmRest agreement, in exchange for
transferring all of the USSI stock to AmRest, petitioner was to receive as
consideration approximately $26.4 million in cash and AmRest stock equal to
approximately $21.6 million.2
Archer was not a party to the AmRest agreement.
The Archer Shares
As stated, under the May 20, 2007, AmRest agreement petitioner was to
acquire the 250 Archer shares he did not then own, and he was to be the owner of
100% of the USSI stock before closing of the USSI-AmRest merger.
On May 25, 2007, petitioner entered into a securities purchase agreement
with Archer (Archer agreement), under which he agreed to purchase the Archer
shares for $14 million.
Under the Archer agreement, petitioner was to receive “all right, title and
interest in and to the Archer shares, free and clear of all liens, claims and other
2
Because of foreign exchange rates, rounding, and differences in the parties’
arithmetic calculations, some of the numbers set forth in our opinion are
approximate.
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[*6] encumbrances” and he agreed to purchase the Archer shares for his “own
account.”
AmRest was not a party to the Archer agreement.
Petitioner’s purchase of the Archer shares closed on June 14, 2007.
Further Events and Amended Merger Agreement
In further preparation for the USSI-AmRest merger, petitioner took a
number of actions as sole shareholder of USSI, including amending its bylaws,
appointing himself its sole director, and giving shareholder approval for the
merger.
On July 2, 2007, USSI, AmRest, and petitioner executed an amendment to
the AmRest agreement (AmRest amendment) under which the amount of cash
petitioner was to receive on the merger was decreased to $23,099,420.
Archer was not a party to the AmRest amendment.
On July 2, 2007, the merger between USSI and AmRest closed. By transfer
into his bank account petitioner received the $23,099,420 cash, and he received
the AmRest stock which then had a market value of approximately $30,791,390.
On July 5, 2007, from the $23,099,420 cash petitioner received, petitioner
paid Archer the $14 million owed to Archer for the Archer shares.
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[*7] Both the AmRest agreement and the AmRest amendment specify that each
share of USSI stock was being exchanged for an equal portion of the total merger
consideration (namely, $53,890,810).3
As reflected in the summary below (and treating the Archer and the non-
Archer blocks of USSI stock as separate blocks of stock and ignoring petitioner’s
argument that he never owned the 250 Archer shares), on the basis of a pro rata
allocation of the $53,890,810 total merger consideration to all 1,000 shares of
USSI stock, petitioner realized on the merger: (1) a $527,298 short-term capital
loss on the transfer to AmRest of the 250 Archer shares and (2) a $40,418,107
long-term capital gain on the transfer to AmRest of the 750 Non-Archer shares:
Archer Non-Archer
Item Shares Shares
250 Archer shares transferred
25% of total consideration received $13,472,702
Less cost basis 14,000,000
Short-term capital loss realized (527,298)
750 non-Archer shares transferred
75% of total consideration received $40,418,107
Less cost basis -0-
Long-term capital gain realized 40,418,107
3
$23,099,420 cash + $30,791,390 stock value = $53,890,810.
-8-
[*8] Petitioner’s Original 2007 Filed Tax Return
On October 15, 2008, petitioner filed his 2007 Form 1040, U.S. Individual
Income Tax Return. On Schedule D, Capital Gains and Losses, thereof, petitioner
treated the 1,000 shares of stock in USSI involved in the merger as one block of
stock, all owned and transferred by him to AmRest.
Petitioner treated the $23,099,420 cash received as taxable, but he reduced
that amount by the $5,977,733 portion of his $14 million total cost basis in the
USSI stock which he allocated to the cash received.4
Accordingly, on his return petitioner reported a net taxable long-term capital
gain of $17,121,687 relating to the $23,099,420 cash boot he received on the
USSI-AmRest merger and a total Federal income tax due of $3,780,522.
Petitioner’s Amended 2007 Tax Return
On October 6, 2009, petitioner submitted to respondent a 2007 Form
1040X, Amended U.S. Individual Income Tax Return.
4
On his original return petitioner’s allocation of $5,977,733 of his total cost
in the USSI stock to the $23,099,420 cash he received on the merger was
calculated using the percentage (42.7%) of the total cash petitioner received
divided by the total consideration petitioner received (i.e., $23,099,420 ÷
$54,099,420 = 42.7%).
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[*9] Consistent with his original return, on Schedule D of his amended return
petitioner treated all 1000 shares of stock in USSI as owned and transferred by
him to AmRest.
However, inconsistent with his original return, on his amended return
petitioner treated the 250 Archer shares as separate from the 750 non-Archer
shares, and in calculating the taxable portion of the $23,099,420 total cash
petitioner received, petitioner ignored the $30.7 million value of the AmRest
shares that he received and that constituted part of the total merger consideration.
First, petitioner treated 25%5 (or $5,774,855) of the total $23,099,420 cash
received as allocable to the 250 Archer shares, and he subtracted therefrom the
$14 million cost of the Archer shares, producing on his amended return a claimed
short-term capital loss of $8,225,145 relating to his transfer to AmRest of the
Archer shares.6
Next, petitioner treated the 75% balance (or $17,324,565) of the
$23,099,420 total cash received as allocable to the non-Archer shares with a zero
basis, and he reported with regard to the non-Archer shares a resulting taxable
5
25% represented the percentage of all USSI shares transferred that
constituted Archer shares.
6
$5,774,855 cash ! cost basis of $14,000,000 = a loss of $8,225,145.
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[*10] long-term capital gain of $17,324,565, an increase of $202,878 over the
$17,121,687 long-term gain reported on his original return relating to the merger.
Petitioner then on his amended return effectively offset or reduced the
$17,324,565 long-term capital gain to be recognized relating to the non-Archer
shares by the $8,255,245 short-term capital loss on the Archer shares, for a
reported net long-term capital gain relating to the USSI-AmRest merger of
$9,099,3207 and a reduced reported total tax liability of $2,577,182.
To date petitioner has paid $2,732,428 toward his 2007 Federal income tax
liability, and he now seeks a refund of the amount paid in excess of the $2,577,182
reported tax due.
Respondent’s Audit and Determination
On audit and in a notice of deficiency respondent treated the Archer and
non-Archer shares of USSI stock as owned by petitioner and as separate blocks of
stock with identifiable and different cost bases (as did petitioner on his amended
return). Respondent calculated the taxable amount or portion of the $23,099,420
total cash received on the merger using the total $53,890,810 merger
consideration--not just the $23,099,420 total cash received (as petitioner had done
on his amended return). As a result of respondent’s calculations, the amount of
7
$17,324,565 ! $8,225,245 = $9,099,320.
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[*11] petitioner’s long-term capital gain petitioner realized on the transfer of the
non-Archer shares increased to $40,418,107,8 and the entire $17,324,565 (i.e.,
75% of the total cash received allocable to the non-Archer shares) was charged or
taxed to petitioner as long-term capital gain.
Reflected below are respondent’s calculations relating to the merger
separately with respect to the Archer and non-Archer shares of: (1) the short-term
capital loss petitioner realized; (2) the long-term capital gain petitioner realized;
(3) the amount of petitioner’s cost basis allocable to each block of stock; (4) the
amount of petitioner’s realized loss to be recognized and allowed to reduce the
taxable portion of petitioner’s long-term capital gain; and (5) the amount or
portion of petitioner’s realized gain to be recognized and taxed as cash boot.
The allocation of the total cash and stock petitioner received is:
Total value of cash and stock petitioner received $53,890,810
25% allocable to Archer Shares 13,472,702
75% allocable to non-Archer shares 40,418,107
8
75% of $53,890,810 = $40,418,107.
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[*12] Item Archer Shares Non-Archer Shares
Petitioner realized $13,472,702 $40,418,107
Less petitioner’s cost basis 14,000,000 -0-
Short-term loss realized ($527,297)
Long-term gain realized 40,418,107
Gain/Loss to be recognized
and taxed:
Short-term loss to be
recognized -0-
75% of $23,099,240
cash boot 17,324,565
As indicated above, relying on the loss disallowance rule of section 356(c),
respondent did not allow the $527,297 short-term capital loss realized on the
Archer shares to reduce or to be netted against the $40,418,107 long-term capital
gain realized on the non-Archer shares or to reduce the $17,324,564 portion of the
cash boot to be recognized and taxed.
As a result of the above calculations, respondent determined for petitioner a
total 2007 Federal income tax liability of $3,811,000--a deficiency of $30,478
(based on petitioner’s originally reported 2007 $3,780,522 tax liability) and a
$6,095 accuracy-related penalty under section 6662(a).
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[*13] Discussion
On brief petitioner acknowledges that on his original 2007 Federal income
tax return the 1,000 shares of USSI stock were incorrectly treated as a single block
of stock, and he agrees that (as reflected on his amended return) those shares of
stock consisted of two separate blocks of stock.
With regard to the Archer shares petitioner makes two arguments.
Petitioner argues for the first time that in transferring the Archer shares to AmRest
he acted only as a nominee or agent for Archer, that he never owned the Archer
shares, and that we should treat the Archer shares as either sold directly by Archer
to AmRest or as redeemed by USSI or by AmRest from Archer. According to his
argument, petitioner would treat $14 million (the amount paid to Archer for the
Archer shares) of the $23,099,420 total cash consideration received from AmRest
as not received by him, but rather as received by and taxable to Archer.
In the alternative and if he is to be treated as owner of the Archer shares on
their transfer to AmRest, petitioner argues he should be allowed to subtract the
$527,297 short-term capital loss realized on the transfer of the Archer shares from
the $17,324,564 long-term gain to be recognized and taxed as cash boot.
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[*14] Petitioner’s Agency or Redemption Argument
Although the Commissioner is authorized to look through the form of a
transaction to its substance, taxpayers have considerably less freedom to do so.
See Estate of Durkin v. Commissioner, 99 T.C. 561 (1992). As the Supreme Court
has stated: “[w]hile a taxpayer is free to organize his affairs as he chooses,
nevertheless, once having done so, he must accept the tax consequences of his
choice, whether contemplated or not”. Commissioner v. Nat’l Alfalfa Dehydrating
& Milling Co., 417 U.S. 134, 149 (1974).
The rule binding taxpayers to the form of their transaction is not absolute.
The Court of Appeals for the Third Circuit, to which an appeal of this case would
lie, has developed and continues to apply the Danielson rule where a taxpayer
seeks to disavow the form of a transaction. The Danielson rule stands for the
proposition that, absent proof of mistake, fraud, undue influence, duress, or the
like, which would be recognizable under local law in a dispute between the parties
to an agreement, a taxpayer generally will be held to the terms or form of an
agreement entered into. Commissioner v. Danielson, 378 F.2d 771, 775 (3d Cir.
1967), vacating and remanding 44 T.C. 549 (1965); Life Care Comtys. of Am.,
Ltd. v. Commissioner, T.C. Memo. 1997-95. This rule, among other things, seeks
to prevent taxpayer challenges to the form of an agreement that, if successful,
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[*15] would nullify the reasonably predictable tax consequences for other parties
to the agreement, grant a unilateral reformation of the contract with a resulting
unjust enrichment, or permit a party to use the tax laws to obtain relief from an
unfavorable agreement. See Commissioner v. Danielson, 378 F.2d at 775.
Petitioner has not challenged the agreements before us on the grounds of
fraud, mistake, undue influence, duress, or the like. Under the Danielson rule
petitioner is prohibited from challenging the form of the transactions before us.
Even if petitioner were not bound by the form of the transactions he entered
into, the stipulated evidence convincingly supports the conclusion that petitioner
purchased the Archer shares from Archer on his own behalf and then transferred
them to AmRest.
Petitioner warranted he would hold of record and beneficially own all 1,000
shares of USSI stock. Petitioner received all right, title, and interest in the Archer
shares, and he agreed to purchase them for his own account. Petitioner acted as
sole shareholder of USSI, amending USSI’s bylaws, appointing himself sole
director, and approving the merger.
No persuasive evidence before us would support a finding of a nominee or
agency relationship between petitioner and Archer or that the Archer shares of
stock in USSI were redeemed from Archer by USSI or by AmRest.
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[*16] Petitioner purchased from Archer the Archer shares of stock in USSI in a
related and essentially simultaneous transaction independent from the merger and
then transferred to AmRest the Archer shares he had purchased.
Neither AmRest nor USSI was a party to the stock purchase agreement
between petitioner and Archer. Archer was not a party to the merger agreement
between petitioner and AmRest. In the calculations on his original and amended
tax returns, petitioner reported the Archer shares as having been owned by him
and transferred by him to AmRest. The substance of the transactions before us
reflects and is consistent with their form.
As determined by respondent, petitioner is to be treated as the recipient of
and is taxable on the portion of the cash boot he received on the merger that is
allocable to the Archer shares.
Petitioner’s Alternative Argument
Petitioner argues in the alternative that if he is to be treated as owner and
transferor to AmRest of the Archer shares and as recipient of the total cash
involved in the merger transaction, he should be entitled to subtract the $527,297
loss he realized on the Archer shares against the $17,324,565 gain to be
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[*17] recognized on the non-Archer shares and to report a reduced total net long-
term capital gain of $16,797,268.9
To support his alternative argument, petitioner cites a number of authorities
and argues that section 356(c) should be interpreted only as prohibiting the tax
recognition of a net bottom line cumulative loss on a merger transaction and that
internal netting of losses and gains should be allowed of different blocks of stock
involved in a merger transaction up to, but limited by, the total amount of the
overall gain to be recognized.
However, petitioner goes much further than any authority which he cites
might suggest. As respondent points out, if (contrary to the loss disallowance rule
of section 356(c)) internal netting were allowable here it would allow only the
$527,297 loss petitioner realized on the Archer shares to reduce the $40,418,107
gain petitioner realized on the non-Archer shares, and petitioner’s tax liability
herein would be significantly increased over the tax liability determined by
respondent (i.e., petitioner would be taxed on the entire $23,099,420 cash boot
that he received).10
9
$17,324,565 ! $527,297 = $16,797,268.
10
Netting the $527,297 short-term loss realized against the $40,418,107 gain
realized produces a net realized gain of $39,890,810, and petitioner would be
(continued...)
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[*18] We agree with respondent.
Petitioner’s argument and citations relating to the internal netting of losses
and gains realized on separate blocks of stock in a merger transaction are not
apropos and are not helpful to petitioner. As stated, even if internal netting were
allowable, petitioner cites no authority that would allow a loss realized to offset or
be netted against a gain to be recognized. We reject petitioner’s alternative
argument.
Petitioner argues that in Rev. Rul. 74-515, 1974-2 C.B. 118, the
Commissioner rejected a key and relevant part of his earlier ruling in Rev. Rul. 68-
23, 1968-1 C.B. 144, in which a loss realized on a block of stock was not allowed
to offset a gain realized on another block of stock. Petitioner cites Gordon E.
Warnke, “Developments, Theories and Themes in Stock Basis”, 86 Taxes 85, 119-
120 (2008), Michael L. Schler, “Rebooting Section 356: Part 2 -- The
Regulations”, 128 Tax Notes 379 (2010), and N.Y. State Bar Ass’n Tax Section,
“Report on Final Regulations Regarding Allocation of Basis Under Section 358
and Related Matters”, Doc 2007-27372; 2007 TNT 241-18 (Dec. 2007).
10
(...continued)
required to recognize the amount of that gain limited only by the total $23,099,420
amount of the cash boot received.
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[*19] Petitioner argues that the 2006 regulations, T.D. 9244, 2006-8 I.R.B. 463,
and 2009 proposed regulations, Notice of Proposed Rulemaking, 74 Fed. Reg.
3509, 3509, 3511, 3519 (Jan. 21, 2009), can be construed to allow internal netting
of a loss realized on one block of stock against a gain realized on another block of
stock so long as a net overall gain is still realized.
Respondent cites Rev. Rul. 68-23, supra, wherein, as stated, the
Commissioner concluded that, in determining gain or loss on a merger transaction
to which section 356 applies, blocks of stock in which a taxpayer has different
bases are to be considered separately, and a loss on one block of stock may not
offset or reduce a gain recognized on another block of stock.
Respondent cites the Court of Appeals for the Fifth Circuit’s opinion in
Lakeside Irr. Co. v. Commissioner, 128 F.2d 418 (5th Cir. 1942), aff’g 41 B.T.A.
892 (1940), involving the loss disallowance rule of section 267 applicable to
related party transactions. In that case the Court of Appeals affirmed a decision of
the Board of Tax Appeals and explained:
But where, as here, four unrelated lots of stock were separately
acquired and might readily have been separately sold, the fact that
after ascertaining the value of each lot all were transferred together
for a lump price will not require or authorize a merger of costs. The
United States may inquire as to which stocks were disposed of at a
profit and tax the profit, and may ignore losses altogether on the
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[*20] disposal of other stocks, though realized at the same time and in
the same transaction. * * *
Id. at 419.
Respondent also cites Curtis v. United States, 336 F.2d 714, 722 (6th Cir.
1964), which involved a corporate reorganization. Therein the Court of Appeals
for the Sixth Circuit quoted Lakeside Irr. Co. extensively and disallowed the
netting of losses and gains and applied the rule of Lakeside Irr. Co. to a merger
transaction to which section 356 applies. This Court has cited both Curtis and
Lakeside Irr. Co. approvingly. See U.S. Holding Co. v. Commissioner, 44 T.C.
323, 333 (1965).
As stated, under his alternative argument petitioner would be taxed only on
a net gain of $16,797,268 on the merger transaction, an amount that can be
reached only by netting his realized loss on the Archer shares against his gain to
be recognized on his non-Archer shares. No authority has been cited that would
support such a calculation.
With regard to petitioner’s alternative argument, we conclude that petitioner
may not net his realized loss on the Archer shares against the gain to be
recognized and taxed on the non-Archer shares.
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[*21] Section 6662(a) Penalty
Respondent’s determination of a $6,096 accuracy-related penalty under
section 6662(a) relates to petitioner’s filed original 2007 Federal income tax return
in which petitioner reported the exchange of the 1,000 shares of USSI stock as a
single block of stock, even though the 1,000 shares clearly constituted two blocks
of stock with different bases and different holding periods.
Section 6662(a) imposes a penalty equal to 20% of the portion of an
underpayment attributable to, among other things, “[n]egligence or disregard of
rules or regulations.” Sec. 6662(b)(1). For the purposes of this penalty, “the term
‘negligence’ includes any failure to make a reasonable attempt to comply with the
provisions of * * * [the Internal Revenue Code], and the term ‘disregard’ includes
any careless, reckless, or intentional disregard.” Sec. 6662(c).11
However, the accuracy-related penalty under section 6662(a) does not apply
to any portion of an underpayment if it is shown there was reasonable cause for,
and that the taxpayer acted in good faith with respect to, such portion. See sec.
6664(c)(1); Carlson v. Commissioner, 116 T.C. 87, 107 (2001). Generally, the
most important factor in determining whether a taxpayer acted in good faith is “the
11
Petitioner’s $30,478 understatement of income tax, see sec. 6662 (b)(2),
does not qualify as a sec. 6662(d)(1) “substantial understatement”, and the
substantial authority defense of sec. 6662(d)(2)(B)(i) is not available to petitioner.
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[*22] extent of the taxpayer’s effort to assess the taxpayer’s proper tax liability.”
Sec. 1.6664-4(b)(1), Income Tax Regs.
Under section 7491(c), the Commissioner has the burden of production with
respect to a proposed section 6662(a) accuracy-related penalty. Once the
Commissioner meets that burden of production, however, the taxpayer continues
to have the burden of proof with regard to whether the Commissioner’s
determination of the penalty is correct. Rule 142(a); Higbee v. Commissioner, 116
T.C. 438, 446 (2001). The taxpayer also bears the burden of proof with respect to
any reasonable cause defense. See Williams v. Commissioner, 123 T.C. 144, 153
(2004).
Respondent determined the section 6662(a) penalty using petitioner’s
original 2007 tax return in which petitioner treated separate blocks of stock as a
single block, a treatment for which there was no reasonable basis in law and that
petitioner has not even attempted to defend. Petitioner has not presented sufficient
evidence to establish good-faith reliance on the advice of a tax professional or that
his reliance on a tax professional was reasonable. See Neonatology Assocs., P.A.
v. Commissioner, 115 T.C. 43, 99 (2000), aff’d, 299 F.3d 221 (3d Cir. 2002).
For penalty purposes, petitioner points us to some authority that he argues
supports his amended return and his alternative argument to the effect that related
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[*23] gains and losses in a merger transaction should be allowed to offset each
other.12 Therefrom petitioner argues that the acknowledged error in his original
tax return should be overlooked. However, respondent’s penalty is based on
petitioner’s position on his original return, not on his amended return. The cited
authority does not support the error petitioner acknowledges was made in his
original 2007 return.
We conclude that respondent has met his burden of production with regard
to the accuracy-related penalty based on negligence or disregard of rules or
regulations, and petitioner has failed to meet his burden of proving that he acted
with reasonable cause and in good faith. We sustain respondent’s determination
of petitioner’s liability for the accuracy-related penalty under section 6662(a).
To reflect the foregoing,
Decision will be entered
for respondent.
12
See the authorities cited supra pp. 18-19.