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reasonable cause and in good faith within the meaning of section
6664(c)(1) is made on a case-by-case basis, taking into account
all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),
Income Tax Regs. The most important factor is the extent of the
taxpayers' effort to assess their proper tax liability for the
year. Id.
Petitioners prepared their 1991 Federal income tax return.
Although we found petitioner to be a credible witness, the record
fails to establish that petitioners acted with reasonable cause
and in good faith in assessing whether petitioner's Social
Security disability benefits were taxable. Social Security
disability payments have been subject to tax since 1984. The
record shows that respondent has challenged petitioner's failure
to include his Social Security disability benefits as taxable
income in the past. Other than their reliance on the Form 886-A,
petitioners offered no proof that they made good faith efforts to
assess their proper tax liability.
Based on this record, we conclude that petitioners are
liable for the section 6662 accuracy-related penalty.
To reflect the foregoing,
Decision will be entered
for respondent.
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Last modified: May 25, 2011