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prudently and exercised due care in choosing the treatment of the
items in issue. Allen v. Commissioner, 925 F.2d 348, 353 (9th
Cir. 1991), affg. 92 T.C. 1 (1989); Neely v. Commissioner, supra
at 947-948. The section 6662(b)(1) penalty shall not in any
event be imposed with respect to any portion of an understatement
as to which the taxpayer acted with reasonable cause and in good
faith. Sec. 6664(c)(1).
Unreported Gross Receipts
In the notice of deficiency, respondent determined that
petitioner had unreported Schedule C gross receipts of $132,330
in 1990 and $58,107 in 1991. Respondent now concedes that
petitioner did not have any unreported gross receipts in 1991,
and the parties have stipulated that the unreported gross
receipts in 1990 were $12,911 rather than $132,330. Citing
Sindik v. Commissioner, T.C. Memo. 1996-47, respondent contends
that the underpayment arising from the unreported receipts is
attributable to negligence because petitioner failed to keep
adequate books and records. In particular, respondent argues
that petitioner was negligent in keeping only invoices and in
failing to maintain a ledger or journal in which he separately
recorded information regarding his gross receipts.
Taxpayers are required to keep such records "as are
sufficient to establish the amount of gross income * * * required
to be shown" on the return. Sec. 1.6001-1(a), Income Tax Regs.
The regulations further provide that negligence for purposes of
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