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petitioners' itemized deductions by $2,357. We sustain
respondent's determination to the extent that it applies to the
Rule 155 computations that we order below.
The final issue to be decided is whether petitioners are
liable for a penalty pursuant to section 6662. Section 6662(a)
imposes a 20-percent penalty on the portion of an underpayment of
tax that is attributable to, inter alia, (1) negligence or
disregard of rules or regulations or (2) any substantial
understatement of income tax. The term "negligence" includes any
failure to make a reasonable attempt to comply with the
provisions of the Code, including failure to exercise due care,
failure to do what a reasonable person would do under the
circumstances, or failure to keep adequate books and records or
to substantiate items properly. Sec. 1.6662-3(b)(1), Income Tax
Regs. The term "disregard" includes any careless, reckless, or
intentional disregard of the Code or of the temporary and final
regulations issued pursuant to the Code. Sec. 6662(c); sec.
1.6662-3(b)(2), Income Tax Regs. A substantial understatement of
tax is defined as the amount which exceeds the greater of 10
percent of the tax required to be shown on the return for the
taxable year or $5,000. Sec. 6662(d)(1)(A).
The accuracy-related penalty does not apply to any portion
of an underpayment with respect to which it is shown that there
was a reasonable cause and that the taxpayer acted in good faith.
Sec. 6664(c)(1). The decision as to whether the taxpayer acted
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