- 12 - Section 6662(a) Respondent determined that petitioners are liable for the section 6662(a) penalty for 1989. Section 6662(a) imposes a penalty in an amount equal to 20 percent of the underpayment of tax attributable to one or more of the items set forth in section 6662(b). In the notice of deficiency, respondent based the determination of the section 6662(a) penalty on petitioners’ underpayment's being due to a substantial understatement. See sec. 6662(b)(2). The accuracy-related penalty does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for such portion of an underpayment and that petitioners acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether petitioners acted with reasonable cause and in good faith depends upon the pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. The underpayment of petitioners' tax for 1989 was substantial in that it totaled almost $38,000. Because they failed to show how the amount paid with their request for extension was estimated, petitioners also failed to show that they acted in good faith with respect to the underpayment. See sec. 6662(d)(1)(A). Respondent’s determination that petitioners are liable for the section 6662(a) penalty for 1989 will be sustained.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011