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(1) negligence or disregard of rules or regulations or (2) any
substantial understatement of income tax. The term "negligence"
includes any failure to make a reasonable attempt to comply with
the provisions of the Code, including failure to exercise due
care, failure to do what a reasonable person would do under the
circumstances, or failure to keep adequate books and records or
to substantiate items properly. Sec. 1.6662-3(b)(1), Income Tax
Regs. The term "disregard" includes any careless, reckless, or
intentional disregard of the Code or the temporary and final
regulations issued pursuant to the Code. Sec. 6662(c); sec.
1.6662-3(b)(2), Income Tax Regs. A substantial understatement of
tax is defined as the amount which exceeds the greater of 10
percent of the tax required to be shown on the return for the
taxable year, or $5,000. Sec. 6662(d)(1)(A).
The accuracy-related penalty does not apply to any portion
of an underpayment with respect to which 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. Sec.
6664(c)(1). The decision as to whether the taxpayer acted with
reasonable cause and in good faith depends upon all pertinent
facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
The most important factor is the extent of the taxpayer's efforts
to assess the 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
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