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IV. Additions to Tax
Sections 6653(a) and 6662 Additions For Negligence Or Intentional
Disregard of Rules and Regulations
In the notice of deficiency issued to NITCO, respondent
determined that NITCO was liable for additions to tax for
negligence or intentional disregard of rules or regulations (1)
under section 6653(a), equal to 5 percent of the respective
underpayments for 1987 and 1988, and (2) under section 6662,
equal to 20 percent of a portion of the underpayment for 1989.
Respondent determined that the 20-percent addition under section
6662 should apply with respect to a $117,547 portion of the
underpayment for 1989. Respondent further determined that NITCO
was liable for an addition to tax under section 6653(a)(1)(B) for
1987. Under section 6653(a)(1)(B), an addition to tax (equal to
50 percent of the interest payable under section 6601) is imposed
with respect to the portion of the underpayment attributable to
negligence. Respondent determined that the portion of the 1987
underpayment resulting from NITCO's improper deduction of
$467,673 in legal expenses was attributable to negligence on
NITCO's part.
In the notice of deficiency issued to the Mussmans,
respondent determined the Mussmans were liable for additions to
tax for negligence or intentional disregard of rules or
regulations (1) under section 6653(a), equal to 5 percent of the
underpayment for 1988, and (2) under section 6662, equal to 20
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