Aldrich H. Ames - Page 17




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               “Negligence” is statutorily defined as “any failure to make            
          a reasonable attempt to comply with the provisions of [the                  
          internal revenue laws]”.  Sec. 6662(c).  “[D]isregard” is defined           
          as “any careless, reckless or intentional disregard” of rules or            
          regulations.  Id.                                                           
               Petitioner contends that he was not required to report the             
          income for the 1989 through 1992 tax years because it was                   
          constructively received during 1985.  We note that, although                
          petitioner contends that the income in question should have been            
          reported for 1985, he has admitted that he fraudulently concealed           
          his espionage income and intentionally did not report it on his             
          1985 return.8  Petitioner’s conduct was not driven by his attempt           
          at compliance with the internal revenue laws; rather his entire             
          pattern of activity reflects his goal of concealment of income.             
               Petitioner, in that same vein, made the novel argument that            
          his failure to report his unlawful income was due to fraud, not             
          negligence, and that the fraud and negligence penalties are                 
          mutually exclusive.9  To the extent that petitioner may not be              
          found liable for both the fraud and the negligence penalties,               


               8 Petitioner characterized as fraudulent his failure to                
          report the receipts that he contends were constructively received           
          during 1985.                                                                
               9 Respondent determined the negligence penalty for each of             
          petitioner’s taxable years in the notice of deficiency.                     
          Respondent’s motion to amend the answer shortly before trial to             
          allege civil fraud was denied.                                              




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