Dieter Stussy - Page 7

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          6662(c).  As applicable herein, section 6662(a) imposes an                  
          accuracy-related penalty equal to 20 percent of the portion of an           
          underpayment that is attributable to negligence or substantial              
          understatement.  Petitioner must prove that respondent erred in             
          determining that the accuracy-related penalty applies to the                
          instant years.  Rule 142(a); Welch v. Helvering, 290 U.S. 111,              
          115 (1933); see also Allen v. Commissioner, 925 F.2d 348, 353               
          (9th Cir. 1991), affg. 92 T.C. 1 (1989); Bixby v. Commissioner,             
          58 T.C. 757, 791-792 (1972).                                                
               For 1992 and 1993, the accuracy-related penalty was                    
          inapplicable if petitioner's understatement did not exceed the              
          greater of 10 percent of the tax required to be shown on the                
          return or $5,000.  See sec. 6662(d)(1).  For this purpose, an               
          amount was not understated to the extent it was based on                    
          substantial authority or adequately disclosed in the return or in           
          a statement attached to the return.  Sec. 6662(d)(2)(B).  The               
          accuracy-related penalty was inapplicable for 1994 if petitioner            
          was not negligent, i.e., he made a reasonable attempt to comply             
          with the Code, and was not careless, reckless, or in intentional            
          disregard of rules or regulations.3  Sec. 6662(c).                          
               We find that petitioner was not subject to an accuracy-                
          related penalty in any of the years.  Petitioner's tax returns              

          3 Negligence has also been defined as a lack of due care or                 
          a failure to do what a reasonable and prudent person would do               
          under similar circumstances.  Allen v. Commissioner, 925 F.2d               
          348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989).                           




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