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Issue 7(b). Accuracy-Related Penalty Under Section 6662
Respondent also determined that Alice Berger was liable for
the accuracy-related penalty under section 6662 for 1989. If any
portion of an underpayment is attributable to negligence,
disregard of rules or regulations, or substantial understatement
of income tax, an amount equal to 20 percent of the portion of
the underpayment attributable to such negligence, disregard, or
understatement, is added to the tax. Sec. 6662(a). Petitioner
Alice Berger bears the burden of proving that she is not liable
for this penalty. Rule 142(a).
Negligence is the failure to exercise due care or the
failure to act as a reasonable and prudent person. Neely v.
Commissioner, 85 T.C. 934, 947 (1985). The term "disregard"
includes any careless, reckless, or intentional disregard. Sec.
6662(c). We have found that Alice Berger acted as a reasonable
and prudent person when reporting her 1989 income because she had
a reasonable basis for estimating her 1989 tax liability as zero.
By a parity of reasoning, we find that she did not carelessly,
recklessly, or intentionally disregard rules and regulations in
connection with the preparation and filing of her 1989 return.
See Weis v. Commissioner, 94 T.C. 473, 487 (1990).
An understatement is substantial if it exceeds the greater
of 10 percent of the tax required to be shown or $5,000. Sec.
6662(d)(1)(A). An "understatement" is defined as the excess of
the tax required to be shown on the return over the tax actually
shown on the return, but the understatement will be reduced if
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