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references are to the Tax Court Rules of Practice and
Procedure.
Section 6664(c) provides that no penalty shall be
imposed with respect to any portion of an underpayment
if it is shown that there was a reasonable cause for such
portion and that the taxpayer acted in good faith with
respect to such portion. The determination of whether this
exception applies 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. An honest misunderstand-
ing of fact or law that is reasonable in light of all the
facts and circumstances, including the experience,
knowledge, and education of the taxpayer, can support a
finding that the taxpayer had reasonable cause and was in
good faith. Id. Generally, however, the most important
factor in determining whether this exception applies is the
extent of the taxpayer's efforts to assess the taxpayer's
proper tax liability. Id.
Petitioner contends that he relied on "substantial
authority" and provided "adequate disclosure" of his
deductions within the meaning of the statute and,
therefore, should be absolved from the penalty. Petitioner
also argues that he and respondent merely have an "honest
difference of opinion" with respect to the law and that
he should be absolved from the penalty on this basis. We
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Last modified: May 25, 2011