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6662(a)(1) for 1990. Petitioners contend that they are not
liable for the accuracy-related penalties for either year. We
agree with petitioners.
The facts and circumstances as to whether there was a
substantial understatement of income tax for 1990 are similar to
those pertaining to 1988. We have previously concluded that for
1988 there was substantial authority for petitioners' treatment
of the settlement payments received from the credit union and an
adequate disclosure of the item's tax treatment in their return.
We reach the same conclusion with respect to 1990 and hold that
there was not a substantial understatement of income tax for that
year. See also sec. 6664(c) (relating to reasonable cause and
good faith).
For the years 1989 and 1990 we also conclude that
petitioners were not negligent in filing their returns.
Taxpayers are liable for a penalty equal to 20 percent of
the part of the underpayment to which section 6662(a) applies.
Negligence is a lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances. Zmuda v. Commissioner, 731 F.2d 1417, 1422 (9th
Cir. 1984), affg. 79 T.C. 714 (1982); Neely v. Commissioner, 85
T.C. 934, 947 (1985). For purposes of section 6662(a),
negligence is a failure to reasonably attempt to comply with the
provisions of the Internal Revenue Code. Sec. 6662(c). The
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