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6651(a)(1) addition to tax in an amount equal to 5 percent of the
deficiency.
Issue 5: The Section 6662(a) Penalty
Section 6662(a) imposes a 20-percent accuracy-related
penalty for, among other reasons, negligence or disregard of
rules or regulations. Section 6001 requires taxpayers to
maintain records to support positions taken on their Federal
income tax returns. In this case, petitioner failed to produce
any documentary evidence to support the positions taken on his
return, with respect to the alleged rental payments, other than
the amounts reported as rental income on the returns of related
taxpayers. As a practicing certified public accountant with
legal training, petitioner should have known that he was required
to maintain and produce such documentary evidence, and his
failure to do so is clearly negligent.
An alternative ground for the imposition of the section
6662(a) accuracy-related penalty--set forth in the statutory
notice--is substantial understatement of income. Sec.
6662(b)(2). Section 6662(d)(1)(A) defines a substantial
understatement as the greater of “(i) 10 percent of the tax
required to be shown on the return for the taxable year or, (ii)
$5,000.” Petitioner reported no tax liability on his 1989
personal Federal income tax return. Respondent has determined,
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