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4(b) Accuracy-Related Penalties for 1989-92
Respondent determined that petitioners are liable for the
accuracy-related penalties under section 6662(a) and (b)(1) for
the taxable years 1989 through 1992.6 These sections impose a
penalty equal to 20 percent of the portion of an underpayment of
tax that is attributable to negligence or disregard of rules or
regulations. "Negligence" includes any failure to make a
reasonable attempt to comply with the provisions of the Code.
Sec. 6662(c). As under prior law, failure to maintain records to
substantiate an item constitutes negligence. Sec. 1.6662-
3(b)(1), Income Tax Regs. The penalty does not apply to any
portion of an underpayment for which the taxpayer had reasonable
cause and acted in good faith. Sec. 6664(c)(1). For the taxable
years at issue, the penalty also may be avoided by making
adequate disclosure of relevant information. Secs. 1.6662-1,
-3(a), (c), Income Tax Regs.
5(...continued)
petitioners credit for the amount of tax withheld. Mr. Kelly is
plainly mistaken. For both 1986 and 1987 respondent properly
computed the underpayment as the excess of the corrected tax
liability over the net payment (amount withheld less amount
refunded). See Woods v. Commissioner, 91 T.C. 88, 95-99 (1988).
Mr. Kelly's challenge to the computation of the "underpayment"
for purposes of the accuracy-related penalties for 1989-92 on the
same ground is similarly without merit. See sec. 6664(a).
6By amendment to answer, respondent also asserted accuracy-
related penalties under sec. 6662(b)(2). We need not consider
the alternative theory.
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