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profit on individual items of glassware, when the activity is
viewed in its entirety, petitioners did not engage in the antique
glassware sales activity for profit.
B. Penalties
Section 6662(a) and (b)(1) impose a penalty equal to 20
percent of any portion of an underpayment attributable to
negligence or disregard of rules or regulations. Negligence is
defined as the lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances. Neely v. Commissioner, 85 T.C. 934, 947 (1985).
Section 6664(c)(1) provides that no penalty shall be imposed
under section 6662(a) with respect to any portion of an
underpayment if it is shown that there was a reasonable cause for
such portion and the taxpayer acted in good faith. Whether the
taxpayer acted with reasonable cause and in good faith is
determined on a case-by-case basis taking into account all of the
pertinent facts and circumstances. Remy v. Commissioner, T.C.
Memo. 1997-72. Relevant factors include the taxpayer's efforts
to assess his or her proper tax liability, the knowledge and
experience of the taxpayer, and reliance on the advice of a
professional, such as an accountant. Drummond v. Commissioner,
T.C. Memo. 1997-71. An honest misunderstanding of fact or law
that is reasonable in light of the experience, knowledge, and
education of the taxpayer may indicate reasonable cause and good
faith. Remy v. Commissioner, supra.
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