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it acted in good faith is consistent with an argument
under that provision.
At the outset, we note that the deficiency determined
in the notice of deficiency is based upon the following
adjustments:
Other income
Earned interest $3,084,179
Amount to reconcile
discrepancy in deferred
interest account 1,596,968
Income reported on
amended return 1425,955
Other deductions
Repossession costs 175,104
Bad debts (736,331)
4,545,875
1We note that respondent has conceded $174,494 of this
amount and that $127,889 of this amount is subject to the
fraud penalty.
In general, "The determination of whether a taxpayer
acted with reasonable cause and in good faith is made on a
case-by-case basis, taking into account all pertinent facts
and circumstances." Sec. 1.6664-4(b)(1), Income Tax Regs.
In making this determination, the most important factor
is the extent of the taxpayer's effort to assess its
proper tax liability. Id. Circumstances that may
indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light
of the experience, knowledge and education of the taxpayer.
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