AMW Investments, Inc. - Page 27

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          income tax return for each year in issue, but it neglected to do            
          so.  Given the fact that taxpayers have a statutory duty to file            
          timely income tax returns, we believe that a reasonable and                 
          ordinarily prudent person would have complied with the statutory            
          duty to file timely such a return.  We also believe that breach             
          of this duty is evidence of negligence.  Condor Intl., Inc., v.             
          Commissioner, 98 T.C. 203, 225 (1992), affd. in part and revd. in           
          part 78 F.3d 1355 (9th Cir. 1996); Emmons v. Commissioner,                  
          92 T.C. 342, 349 (1989), affd. 898 F.2d 50 (5th Cir. 1990).  The            
          fact that petitioner was negligent in the instant case is also              
          supported by the fact that petitioner erroneously claimed                   
          deductions for the interest expenses and its shareholder’s legal            
          fees.  See Condor Intl. Inc., v. Commissioner, supra at 225;                
          Emmons v. Commissioner, supra at 349.  We hold for respondent on            
          this issue.                                                                 
          5.  Section 6662                                                            
               Respondent also determined that petitioner's underpayments             
          of Federal income taxes for the 1989 and 1990 taxable years were            
          due to negligence, and, accordingly, that they were subject to              
          section 6662(a).  Section 6662(a) imposes an accuracy-related               
          penalty equal to 20 percent of the portion of the underpayment              
          that is attributable to negligence.  See also sec. 6662(b)(1).              

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