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Section 6662(a) Accuracy-Related Penalty
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). Respondent asserts
that the entire underpayment of petitioners’ tax was due to
negligence or intentional disregard of rules or regulations, sec.
6662(b)(1), or a substantial understatement, sec. 6662(b)(2).
Because respondent raised the accuracy-related penalty in her
answer, respondent bears the burden of proof on this issue. Rule
142(a).
“Negligence” includes a failure to make a reasonable attempt
to comply with the provisions of the internal revenue laws. Sec.
6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. “Disregard”
includes any careless, reckless, or intentional disregard of
rules or regulations. Sec. 6662(c); sec. 1.6662-3(b)(2), Income
Tax Regs.
Petitioners' failure to maintain and to produce reliable
records of their financial transactions and taxable income
supports a conclusion of negligence. Crocker v. Commissioner, 92
T.C. 899, 917 (1989); Schroeder v. Commissioner, 40 T.C. 30, 34
(1963). They cannot avoid the penalty based on reliance on their
tax preparers because they did not provide the preparers with
sufficient and accurate information to prepare their returns.
Metra Chem Corp. v. Commissioner, 88 T.C. 654, 662 (1987). The
evidence justifies the penalty for negligence.
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