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presented no evidence to show that they acted with reasonable
cause or good faith.11 Therefore, we find that the accuracy-
related penalty under section 6662(a) applies to the underpayment
of tax associated with this settled issue.
In regard to the $40,000 deducted by the corporation as
consulting fees, we have upheld respondent's determination.
After thoroughly reviewing the record in these cases, we find no
persuasive evidence or argument that the corporation acted with
reasonable cause or good faith with respect to this issue. On
this record, we hold that the corporation negligently or
intentionally disregarded rules or regulations with regard to the
underpayment of tax associated with this issue. Accordingly, the
accuracy-related penalty under section 6662(a) is sustained with
respect to the underpayment of tax associated with this deduction
by the corporation.
Mr. Norwalk reported his allocable portion of the dividend
($16,680) on his return. Even though he did not characterize
this amount as a dividend, the net effect of this was de minimis.
We find that any understatement attributable to this was not due
to negligence. Thus, Mr. Norwalk is not liable for the accuracy-
related penalty under section 6662(a).
Transferee Liability
11With respect to the adjustments in the notice of
deficiency issued to Robert and Patricia DeMarta, the parties
filed a stipulation of settled issues with this Court on Oct. 24,
1997.
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