Sec. 6662(a) and (b)(1). Negligence is defined to include any
failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue Code. Sec. 6662(c). It is
further defined as the failure to do what a reasonable person
with ordinary prudence would do under the same or similar
circumstances. Neely v. Commissioner, 85 T.C. 934, 947 (1985).
A taxpayer can avoid the imposition of the negligence penalty by
demonstrating that the underpayment of tax was due to reasonable
cause and that the taxpayer acted in good faith with respect to
the underpayment. Sec. 6664(c).
Regardless of how Management's Form 2553 was actually
transmitted to respondent, we are satisfied that petitioner, in
good faith, believed that a valid S election had been made prior
to the time that he filed his 1993 return. Consequently, the
imposition of the section 6662(a) negligence penalty is not
warranted.
To reflect the foregoing and a concession by petitioner,
Decision will be entered
for respondent with respect to the
deficiency and the addition to tax
under section 6651(a) and for
petitioner with respect to the
section 6662(a) accuracy-related
penalty.
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Last modified: May 25, 2011